The Need for Compliance & Ethics in Latin America

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Javier Tapia, Jun 30, 2015

A breath of fresh air is coming to Latin America competition law and policy. Compliance seems to be booming—at last! In 2015 alone there have been at least three international conferences, held in different countries, with long sections dedicated to the subject. There is also an international academia providing courses once a year in an important Latin American city (Sao Paulo, Brazil). These are the most recent steps in the path of increasing knowledge and importance of compliance and ethics programs in the field. Authorities, academics, practitioners, and firms—of any size—now talk about antitrust compliance. Only five years or so ago, this would have been something unexpected.

Most importantly, the talk has turned into action. At governmental level, several agencies are adopting real methods of recognizing compliance. Some of them have issued—or are about to launch—guidelines on the topic. For instance, the Chilean competition agency issued a document entitled Competition Compliance Programs: Complying with Competition Law , which definitive version was launched on June 11, 2012. Likewise, the Colombian authority  is undertaking interesting projects in the area, with the aim of issuing an official document. In other countries, guidelines used in other areas may have a significant impact on competition. This is the case of the Brazilian Decree No. 8,420/2015, issued within the framework of the Clean Company Act, which aims at implementing effective anticorruption compliance programs.

These guidelines represent a landmark step for competition regimes, because of their double value as policy declarations (setting out the approach the agency will adopt regarding compliance programs) as well as guidance for business conduct.

All of this is welcome news. So far, besides big multinational firms, compliance programs have remained a novelty among Latin American business communities and public servants. However—as I argue here—they are utterly needed.

As Section II shows, Latin American markets are highly prone to cartels. Several reasons may explain the phenomenon. There is a mixture of cultural, historical, and institutional factors supporting this assertion. The answer to this reality, as Section III exposes, has been to deal with collusive behavior using an ex post approach—what in the regulatory literature is called “dissuasion.” Under this, prosecution, detection, and deterrence are explicitly favored.

However, dissuasion is not without its shortcomings. As Section IV argues, such an approach has proved insufficient to tackle anticompetitive conduct; arguably because it does not completely match the very same features that explain misbehavior in first place. An ex ante approach, based mainly on compliance and ethics programs, should at least serve as a necessary complement.

There is a need for placing more emphasis on the compliance and ethics field. However, the success of such an enterprise depends on a profound understanding of the true nature of compliance. Do we really know what we talk about when we talk about compliance? That is the question advanced in Section V.