Compliance

Precautionary principle

Compliance is based on the general rule of corporate responsibility. For example, market responsibility regarding dominant companies. More generally, a company must ensure that it respects environmental, social or ethical guidelines. In economic terms, companies need to internalise the external effects of their behaviour and decisions. For example, companies should no longer pollute by throwing toxic material into the environment, even if they have paid taxes which they feel gives them the right to pollute. Internalising these effects implies drafting internal procedures to uphold legal obligations, such as applying precautionary principles to avoid an offence, or implementing ethical business commitments to safeguard the company’s brand image and/or reputation. These compliance principles are generally ex ante and in line with regulation instead of the ex post approach in litigation.

TERA accompanies clients in all their compliance actions, namely to respect competition law and satisfy regulatory requirements.

Economic evaluation of ex ante practices

Companies in a dominant or potentially dominant position, have a responsibility to the market. They must ensure that a priori their pricing, rebate or discount practices, or loyalty programs and marketing do not produce anti-competitive effects. Before undertaking a decision regarding structural practices, the company should carry out an economic review of its competition compliance to ensure that these practices do not harm competition, or that they may benefit from legal or regulatory exemptions.

European legal texts and rulings state that companies with a cumulative 30 to 40% market share also have market responsibility. These responsibilities cover the sales relationship they have with suppliers or clients and when restrictive competition clauses are involved: exclusivities, supply quotas, distribution and restrictive conditions, clients and restrictive conditions. In this context, an economic review of competitive compliance can be very useful.

Operators with significant market power in sector-specific regulation must also ensure ex ante that their practices are in line with rules laid out by law, regulation and regulatory authorities’ decisions.

Many contexts apply to overall prevention: legality and neutrality of information shared amongst competitors, pre-operation analysis of market concentration to anticipate competitive effects, rules to access essential resources, fair tariff practices and organising third-party suppliers for Services of General Economic Interest in competitive markets.

TERA regularly carries out economic audits to ensure that companies abide by players’ economic practices. TERA’s renowned skills and experience include modelling costs and tariffs, cost allocation and margins in diversified companies, as well as assessing market power and positions. TERA’s recognised skill-set ensures that it can correctly implement compliance procedures.

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    TERA, international consulting and economic expertise firm founded in 1996, works in the fields of sector regulation, competition, litigation and damage assessment.

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