ANA LİZ
A Manager’s Guide to
Competition Law and Ethics
“It is a common syndrome among managers to develop a very dangerous self-
confidence by seeing their staff attending competition law trainings every six
months, as dictated by corporate rules. This practice should not be considered
as a compliance program. Memorizing competition law requirements and
deciphering the rationale behind it -- which is not rocket science, though -- does
not guarantee a safe harbor.”
Fevzi M. TOKSOY, PhD
I
personally observe that the ma-
naging staffs of companies are
becoming highly aware of com-
petition law but this awareness
is frequently related to the great
label it holds as ‘something of a
great threat to my career’. The principal
objective in delivering this piece is to
clarify the key aspects of competition
law through its linkage to a general un-
derstanding of compliance and ethics.
Not to degrade other components of
corporate compliance, competition law
does indeed rank high in the overall
compliance agenda of corporations.
Sanctions designed to prevent busi-
nesses from violating competition law
are getting more and more severe. Es-
pecially in the case of cartels, convicted
companies are facing monetary fines
amounting to hundreds of millions of
dollars, not to mention the loss of repu-
tation that may cause irreparable harm
to the value of a company. The main re-
ason for such a severe punitive design
stems from the fact that competition
law violations are hard to detect and
hence vigorous deterrence seems to be
the most effective way to keep compa-
nies and managers away from even the
idea of breaching these rules.
COMPETITION LAW BREACHES AS
THE SNEAKY ENEMY OF ETHICAL
CONDUCT
Here, it is worth recalling what compe-
tition law forbids. First of all, economic
activities are expected to develop wit-
hin existing competition among rival
firms. The ideal outcome of a competiti-
ve process in every economic activity is
accepted to be better products at redu-
ced costs. However, for a specific player,
this process does not guarantee profit
maximization or sustained presence in
the market. These are such tempting
goals for any entrepreneur in a market
economy that sometimes competitors
may wish to refrain from rivalry and
instead may rationalize anti-competi-
tive practices to achieve excessive pro-
fits or to at least guarantee their seat
at the table. To resist this temptation,
two “commandments” [major orders]
are globally accepted in all competition
laws: first, thou shalt not conspire with
competitors and second, thou shalt not
misuse your market power to eliminate
competition. The problem is that orga-
nizations can violate these two prohi-
bitions under many different scenari-
os, not all of which should necessarily
classify them as state-of-the-art robber
organizations. We can align the multi-
tude of anti-competitive conduct along
a spectrum, from collusion-related an-
ti-competitive conduct at one end to
market-power related anti-competiti-
ve conduct at the other. The ethics in-
dicator points to the maximum rate of
unethical when certain conduct is clas-
sified as collusion-related. Such con-
duct commonly identifies companies
as ‘cartels,’ which is a “state-of-the-art
robbery organization”.
Cartels are designed to eliminate the
fair result that an intervention-free
competitive environment would other-
wise provide to consumers.
A study 1 shows that the total sales of
products subject to cartel surchar-
ges amount to 16 trillion US Dollars
worldwide. This is a huge sum. This
clearly means that we, as consumers,
are deprived of innovative products in
all markets, the sales of which make
up this total amount. Since we are the
producers of some of these products
and at the same time consumers of ot-
hers, we are not living the full potential
of the present. This is economic time
travel, where we have no other option
than to go backwards. This explains the
rationale behind the harsh deterrence
mechanism in the fight against cartels,
because no administrative or judicial
resource in the world seems to be able
to detect all cartels. This picture reve-
als another type of competition. This
competition is among the competition
agencies in the effective fight against
cartels. Innovative methods to fight
cartels are introduced one after anot-
her and armies of deterrence mecha-
nisms are put into effect to discourage
companies from forming cartels.
Of course other types of competition
law infringements exist, which also
pose a serious threat to the proper
functioning of competitive markets.
Classified under market power relat-
ed conduct, implementation of those
anti-competitive practices leads to
the foreclosure of the markets. In mar-
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