HAVING A substantial compliance program in place is insufficient to prevent a business from falling foul of regulators and the courts. The business must also be able to implement that program successfully, a white paper by the former chair of the Australian Competition and Consumer Commission (ACCC) has warned.
In Federal Court cases involving the Trade Practices Act, for example, the Court may consider factors beyond those mentioned specifically within the Act, “including measures within a corporation conducive to compliance with the Act”, wrote Professor Allan Fels.
“I think there have been three phases with regard to compliance programs in Australia,” Fels told Lawyers Weekly. “The first is that there is a period when firms decided almost as a formality that they would have a compliance program but they weren’t terribly serious or rigorous in how they went about doing it and they are then exposed in the courts.
“The second phase is where they are starting to pull up their socks and get more serious and their compliance programs improve, but they still have the embarrassment of being caught out not complying with the law.
“[And third], there are a fair number who have really serious compliance programs that should prevent breaches of the law in most cases right across the range of thousands of employees.”
According to the white paper, the Australian Standard on Compliance Programs (AS3806) has made “a quantum leap for compliance”, suggesting “there is a lot more to it than presentations and manuals. Effective compliance is about a management systems approach”. The AS3086 framework addresses the structural, operational and system maintenance elements necessary for effective compliance.
“Where firms have a designated compliance manager it will be their role to ensure that regulatory risks are identified and appropriate compliance procedures or other mechanisms are developed and maintained,” the white paper said. “It will, however, be the operational managers who have the responsibility for implementing these procedures.”
Business now largely appreciates the importance of compliance, Fels said, but said it was no simple situation. “I think there has been a considerable increase in the awareness of employers in the last 10 or 15 years,” he told Lawyers Weekly. “But this is an ongoing challenge, a permanent challenge to business. They know law enforcement’s not going to go away, the media and publicity are not going to go away. There need to be systems in place for compliance and continual updating attempts to keep a spirit of compliance alive.”
Companies already have to contend with new laws, an increasingly complex regulatory environment and the prospect of future corporate laws inspired by the US Sarbanes-Oxley Act.
“Ongoing pressure for new laws and for compliance by big business will not go away,” Fels said. “We hear a lot of talk about the need to deregulate, even at the height of the deregulation movement in the US and here the rate of growth of new laws in Australia is 10 per cent per annum. I tend to believe that US leadership in corporations law and competition law is spread around the world and the US itself makes considerable effort to spread the gospel of its own.”
Fels believes these increases will be accompanied by a trend of regulators getting tougher, which will continue for at least the next few years. “Over the very long term, you tend to get cycles of ups and downs and changing regulations,” he said. “When regulation goes soft you get softer compliance and then you get more scandals, then safety laws, for example, go soft, then you get a few more deaths and that means there has to be a revival of vigorous enforcement.”
“I’ve always thought that the TPA and other laws are important in themselves but the real challenge is to get compliance and compliance can’t be obtained without firms organising systematically to ensure that everyone in the firm understands the law and has reason to obey it,” Fels said. “ The Trade Practices Act is an excellent piece of legislation, but it won’t have good economic and social effects unless there’s compliance.”
Related story: see ‘Experts back current compliance laws’ on page 1 this week