May 12, 2016

Competition Law: An Intercultural Perspective

Intercultural Management

Why is competition law applied differently in different cultures despite the heavy penalties?

Competition Law: An Intercultural Perspective

Olivier d’Ormesson, a lawyer specialising in competition law and a member of the French Competition Authority’s board, has analysed the requests for leniency submitted to the European Commission and the French competition authorities. Here, he expresses his astonishment at the different reactions observed according to the nationalities in question.

Interview with Olivier d'Ormesson

Could you tell us what the leniency programmes are?

The leniency programmes, which grant total immunity from fines to the first company which reports a cartel, were applied for the first time in Europe in 2001 and in France in 2006. These programmes make it possible to detect the most sophisticated and best hidden cartels: more than 80% of the cartels dealt with by the European Commission since 2008 were identified throughleniency. They are also very useful for the informant, not only because he doesn't have to pay a fine but also because he weakens his competitors, who then face heavy financial penalties.

Who are the parties requesting leniency?

When we examine the nationality of the applications for leniency submitted to the European Commission, there are surprises in store: the groups having reported a cartel are not uniformly distributed among the different European countries.

Instead, we find that the countries of northern Europe are overrepresented compared to those of the South. Since the procedure came into being, the groups having initiated leniency proceedings are mainly German (20% of the total), American (20%), British (14%), Japanese (10%), Dutch (8%), Swiss (7%), Korean (3%) and French (3%, including the very first application for total immunity in Europe submitted in 1999 by Rhône–Poulenc). No request for total immunity have been submitted by Italian, Spanish, Portuguese or Greek groups or those in Eastern Europe. It would therefore be fair to say that these groups are the big losers in the leniency procedures as following the actions of their competitors they had to pay considerable fines for the cartels for which they were involved.

We may at least have expected French groups to be heavily represented among those applications for leniency submitted to the French competition authority, but this is not the case. Groups of German, American and Dutch origin are the main beneficiaries of total exoneration measures granted by the French system. In fact, although several French companies have reported cartels in France, these were all subsidiaries of foreign groups.

How do you explain this geographical division in terms of leniency applicants in Europe and France?

One theory is that Germany, the United States, the United Kingdom and more generally the countries of northern Europe have a longer tradition of applying competition law. They therefore use the instruments offered by this law more skilfully, although a "rebalancing of the nationalities" should occur as the "competition culture" becomes more widespread in Europe.

Another hypothesis is cultural: respect for the "rule of law" takes precedence over interpersonal relationships in northern Europe, which is less the case in the south.

The work of Trompenaars and Hampden-Turner, specialists in intercultural communication, sheds further light on this issue.

Trompenaars asked the same questions to thousands of managers in around 40 countries. The question of interest to us in particular concerns the importance of the rule of law in relation to personal relationships: "if you're in the car of a friend who is speeding and this friend has an accident, do you tell the police that he was speeding or do you lie to protect your friend?"

The results of Trompenaars should come as no surprise: the countries in which the rules are strictly applied were the USA, the United Kingdom, Germany, the Netherlands, Australia, Switzerland and the Scandinavian countries. For their part, the Italians, Spanish, Portuguese, Greeks and French focused more on personal relationships.

We therefore find the same "geographical distribution" in these analyses of intercultural relations as seen with the nationalities of groups applying for leniency.

There's also something else which should be noted: French groups are currently more often the victims of leniency than beneficiaries of it.

Intercultural commentary from Akteos

To understand this geographical breakdown, we used the Nomad Profile, a model developed by Akteos based on 10 cultural aspects. We compared the profiles of the countries mentioned above, particularly for professional relationships and the application of rules, and we found exactly the same rankings as those shown in the analysis of leniency applicants!

We chose four European countries to illustrate this.

These graphs show that the Germans and the British are more focused on the task at hand and the application of rules, while the French and Italians favour the quality of relationships and apply the rules according to the circumstances.

For some cultures, trust and confidence are based on the links forged between individuals. This can explain why there are few informants in the countries in which these links are seen as crucial.

In other cultures, trust and confidence are based on the expertise of the individuals concerned, and compliance with deadlines or procedures, and so informing has a reduced impact on professional relationships.

There are differences between "Latins" and "Anglo-Saxons" concerning the concepts of Law, of the State and of Freedom. In L’âme des peuples, André Siegfried provides interesting explanations of the differences between the "Latins" on the one hand and the Americans and the British on the other.

These general observations demonstrate that despite globalisation, societal changes, IT, new communication technology and the circulation of information, fundamental cultural factors are deeply rooted in people's mentalities and can influence their behaviour.

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