Chapter 13: Litigation PR in antitrust law: How to ensure company searches and sanctions do not turn into a public relations disaster

4 April 2019

I. Introduction

Violations of antitrust law can result in heavy sanctions for companies. Therefore, many firms invest a considerable amount of their resources in antitrust law compliance. Yet sanctions are not the only area of concern for senior management at these companies: Reputational damage which occurs as a side-effect of these antitrust law proceedings – irrespective of their legitimacy – can also have far-reaching consequences for the companies concerned.

Given this situation, an effective litigation PR strategy (legal communication) cannot focus solely on the antitrust proceedings themselves, but must also be aimed at public opinion. Particularly when it comes to antitrust law, which at times also involves political aspects, it is nothing less than negligent in 2019 to engage in any legal dispute without a carefully-planned litigation PR strategy – even if there appear to be no grounds for concern.

 

II. Antitrust law and litigation PR challenges

In most jurisdictions, antitrust authorities investigate three types of company practices: Agreements affecting competition, abuse of market power and company mergers.[1] Depending on the procedural approach taken by the antitrust agency and the perceived risks therein, a customized legal communications strategy is necessary.

 

A. Unlawful agreements affecting competition

 
A.1. Risk factor antitrust agency

In the case of cartel arrangements, a distinction is made between unlawful horizontal agreements (e.g. between manufacturer and manufacturer) and unlawful vertical agreements (e.g. between manufacturer and distributor)

A.2. Legal communication challenges

Where agreements restricting competition are suspected, most antitrust authorities can conduct unannounced company searches in the premises of the firms concerned. The searches are generally accompanied by a notification to the public by the antitrust authorities to this effect. This means that companies, in particular their communications professionals, must act quickly and be prepared to respond to questions from employees and the public.

In many countries, companies participating in agreements restricting competition have the option of filing a leniency application (voluntary disclosure), which exempts the applicant from sanctions, or at least reduces their exposure to sanctions. If a company decides to file such a leniency application, a communications strategy must still be in place. Ultimately, merely filing this application does not ensure protection against reputational damage in the eyes of the public.

If the competition authority determines that an agreement affecting competition has been made in violation of antitrust law and a sanction is imposed, the ruling will be announced and made accessible to the general public. At this point, if not before, the company will become the subject of media reports and will certainly face questions from the media.

 

B. Abuse of market power

 
B.1. Risk factor antitrust agency

Antitrust law does not prohibit market power in itself. Rather, it only prohibits the exploitation of a dominant market position for abusive practices. The extent to which a company dominates a market – i.e. if it is able to operate for the most part independently of other market participants – is always evaluated against the background of a specific market. In the first place, the dominant market participant is prohibited from carrying out abusive practices towards customers or suppliers. Equally prohibited are attempts by the dominant market participant to directly force competitors out of the market.

B.2. Legal communication challenges

Even when a company is only suspected of abusing market power, competition authorities can conduct searches of the company premises. When this happens, the company is now under greater pressure than it would have been, had it been involved in cartel arrangements –  because in such a case it is only this one company by itself which is under the spotlight of the antitrust investigators[2].

As well as answering questions regarding fines, the communications professionals also need to provide answers if the dominant market participant finds itself subject to long-term requirements to comply with competition guidelines.

 

C. Prohibited company mergers

 
C.1. Risk factor antitrust agency

Generally speaking, companies are free to restructure their operations through the acquisition of other companies or by merging with them. However, in the event that such a merger creates a market concentration that exceeds reasonable levels, the responsible competition commission is obliged to evaluate the merger and, if appropriate, prohibit it.

If companies forget to report a merger to the authorities in good time and that merger itself is subject to reporting obligations, then the competition authority can sanction the companies involved. If the competition authority determines that a review of the merger is necessary, implementation of the merger is prohibited until the review procedure is completed. In the event of a breach of the implementation prohibition, this too can lead to sanctions, as well as reputational damage.

C.2. Legal communication challenges

Prior to reporting the merger to the competition authorities, meticulous preparation is essential. Given the discretionary powers vested in the competition authorities, the company would be well advised to integrate the relevant stakeholder groups into the communications process at an early stage and thereby avoid a rude awakening if the merger is not approved.

When the competition authority exercises its investigatory rights in a merger, the best possible outcome is that the competition authority grants an approval without conditions for the merger and the companies can proceed as planned. This best-case scenario provides the communications professionals with an ideal marketing message for the newly-formed company.

An approval with conditions may not represent the ideal outcome for the company, but this scenario certainly provides positive messaging for the communications professionals and they can still maximize the benefits for the company under the given circumstances.

Disapproval of the merger represents the worst-case scenario for the company – not only from a strategic or legal perspective, but also in terms of communications and vis-à-vis investors. While enjoying a powerful position in the market can offer certain benefits from a marketing point of view, it clearly also brings some limitations too, since the company’s future ability to operate freely in the marketplace is significantly restricted.

 

III. Litigation PR in antitrust law proceedings

A. Definitions

 
A.1. Weak litigation PR

Poor communication is based on the wrong strategy or utilizes the wrong media and content; or the timing is bad; or it is directed at the wrong target group. Bad communications can result in significant reputational damage for the company, it can lead to claims for compensation and may even result in a legal outcome which is disadvantageous to the company itself. Rash “mea culpa” statements are examples of bad litigation PR. Although they may serve to satisfy the needs of a section of the public, where an admission of guilt is poorly-timed (e.g. while proceedings are ongoing) this can even result in the company needlessly prejudging the entire outcome of the official proceedings. Clearly, once a company has issued a public apology, this cannot then be retracted after the fact.

A.2. Strong litigation PR

A strong and effective litigation PR strategy can have a positive impact on the outcome of the antitrust law proceedings in favor of the company, especially where the lawyers and the communications professionals responsible for the case are involved and can reinforce the litigation strategy and the legal arguments. With such a strong communications approach in place, the legal content can also be presented to the public and the media in a clear and understandable way, thereby preventing false interpretations of the facts.

Moreover, a well thought-out legal communications strategy can also help to protect the reputation of the company before, during and after the antitrust law proceedings. Such a strategy also serves to restore the credibility of the company and ensures that public trust in the company is not lost.

 

B. Design

 
B.1. Stakeholder mapping

The first step is to identify the stakeholders, their needs and interests. The following stakeholders are involved: company owners, employees, customers, suppliers, antitrust authorities, competitors and the media.

B.2. Strategy selection

When it comes to selecting a suitable communications strategy, the options can be simplified into the choice between an offensive and a defensive strategy. An offensive strategy features direct communication which is clear and to the point, whereas a defensive strategy focuses on issuing selected information (usually provided on request only).

B.3. Media selection

An ideal mix of media activities usually includes the following communication media:

  • Press publications: In addition to the classic press releases and newspaper articles, publications in special-interest magazines and the publication of legal and economic studies and of expert opinions, can all serve to reinforce the legal arguments. For the general public, complex subject matter – which is often found in antitrust law – must be broken down into a series of short, memorable messages that are easily understood (message development).
  • Internet: Blogs, forums and social media all foster interactive exchange with the relevant stakeholders and facilitate the viewing and analysis of opinions expressed on the internet, and where necessary, allow the information being presented to be questioned.
  • Public appearances: As far as big companies are concerned, press conferences are a traditional medium where statements are issued in response to accusations and where journalists are given the chance to ask questions. Radio and television appearances also provide similar opportunities.
  • Background discussions: Whereas interviews – whether in writing or for a radio or television program – involve the risk of statements being taken out of context, background discussions with journalists or editorial staff are a viable alternative.
B.4. Team selection

When it comes to larger companies, the corporate communications department is often an excellent point of contact for litigation PR, while smaller companies usually need to start by appointing an individual to take care of litigation PR. Responsibility for litigation PR includes the areas of strategic planning, stakeholder mapping, selection of communication media and messaging, as well as managing/fine-tuning the litigation PR process.

It is essential that the person(s) assigned to manage the litigation PR process, maintain a close and ongoing working relationship with senior management, as well as with the company’s internal and external legal teams.

In complex cases it is often necessary to engage the services of a specialist. This approach allows the legal department, company management and the communications department to then focus on their own core activities.

 

IV. Conclusions

Since there are no hard and fast rules to follow when developing a sustainable and effective litigation PR strategy, an individual planning session with a litigation PR expert is a great place to start. At the same time, there are some ground rules that should be followed. One such rule is that any litigation PR strategy needs to be meticulously planned and executed with communications professionals, legal experts and company management all working closely together. While compelling core messages need to be reinforced with the relevant stakeholders on an ongoing basis, it is also important to keep a watchful eye on the big picture to ensure that the company is not ambushed by unforeseen events – whether they involve the antitrust authorities, a political opponent or market competitors.

 

[1] In many cases, provisions governing state subsidies are also incorporated into antitrust law. However the present document will not include commentary on this subject matter.

[2] Cases of collective market power are rare.


About the auhor

Prof. Patrick L. Krauskopf, PhD (LL.M. Harvard) is the chairman of AGON LEGAL PARTNERS AG, the leading Swiss competition law chambers. He is also the head of the Center for Competition Law and Commercial Law at the School of Management and Law in the ZHAW University of Applied Sciences.

Seraina Gut is a legal assistant at AGON LEGAL PARTNERS AG. She conducts research at the Center for Competition Law and Commercial Law at the ZHAW. She also specializes in regularly supporting mandates in the areas of compliance and litigation PR.

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