Fostering relationships with regulators – Trade Regulation & Practices

It is common for businesses to perceive, and treat,
regulators as hostile adversaries – and they often are. However,
for many large and complex organisations, engagement with
regulators like the Australian Competition and Consumer Commission
(ACCC) is a necessary and increasingly frequent
activity.

In that environment, to what extent is there merit in
fostering an organisation’s relationship with a regulator, and
are trust and transparency a relevant currency?

Business’ engagement with the regulators like the ACCC can
take many and varied forms, including merger reviews, industry
inquiries, authorisation processes and enforcement investigations
and litigation – and in each case, a business may be the target /
subject of the ACCC process or an interested third-party.

There has been a clear trend in recent years towards the ACCC
becoming generally less trusting and more sceptical in its
interactions with businesses and pushing for greater structure and
formality in its processes. For instance, the ACCC is lobbying for
merger reforms to impose compulsory filing and information
requirements, is making greater use of its compulsory information
gathering powers (including to obtain sworn oral evidence from
executives), is now routinely seeking production of all documents
produced to other agencies in global merger review processes, and
has implemented a new process to require privilege claims made in
relation to documents withheld from the ACCC to be identified and
justified.

Trust is also a two-way street, and the ACCC relies to a degree
on the trust and goodwill of businesses (as well as a healthy dose
of self-interest) to make its processes work, including in
encouraging self-reporting, immunity and leniency applications, and
in soliciting submissions and commercially sensitive information
from third parties in merger and enforcement processes.

While it is awkward to talk about having a
‘relationship’ with a government enforcement agency with
1,300 employees, we regularly perceive clients with different
histories, or approaches to engaging, with the ACCC being treated
with differing degrees of trust or suspicion. We observe that, in
otherwise similar situations, some clients are treated with a
degree of hostility and suspicion, and others enjoy a more open
dialogue with the ACCC and find their submissions more likely to be
taken at face value.

While the merits of argument should and usually do carry the
day, regulators’ decisions are made by people and relationships
are important. The ACCC has clear enforcement priorities, and
various internal processes to drive robustness and consistency in
decision-making, but it is not monolithic. The views formed by ACCC
staff and Commissioners, including regarding the conduct of
investigations, are inevitably and unavoidably influenced by their
assessment of the trustworthiness and integrity of the
organisations and advisors that provide information to it, which is
in turn based upon relational factors. It is possible to have
meaningful personal relationships with ACCC staff and Commissioners
with whom you interact regularly, and organisations and advisors
can also develop reputations (favourable or unfavourable) with the
regulator.

Even for businesses under intense regulatory scrutiny, there are
several ways to foster respectful and constructive relationships
with regulators:

• Value the business’ credibility and reputation within the
  regulator as a forthright and reliable organisation. There are many
  opportunities to be ‘sharp’ in providing information to
  regulators (without being inaccurate or misleading), but the
  potential longer-term risks to the business’ relationship with
  the regulator need to be considered. For the same reason, always
  verify factual information that is provided to the ACCC and avoid
  strained or implausible arguments that are poorly supported by
  evidence.




• Recognise the mutuality in the relationship with regulators
  over the longer term. Sometimes there is merit in assisting the
  ACCC in circumstances where the business is indifferent, but the
  assistance is important for the work of the ACCC.




• Be strategic about the person or people within a business that
  ‘owns’, or is primarily responsible for, engagement with a
  particular regulator, and seek to provide continuity where
  possible. Also, recognise the potential risks in non-legal
  employees owning relationships with regulators – while government
  affairs and policy professionals are often more adept at
  relationship management, there are significant trade-offs in terms
  of protecting privilege and being able to identify legal hazards
  that emerge from policy engagements.




• Be transparent about the commercial rationale for a transaction
  or other proposal. Vague, aspirational statements often serve only
  to arouse suspicion about ‘what’s really going
  on’.




• Choose advisors who care about their relationships with the
  regulators, and who value their personal credibility and
  reputation.




• Never lose sight of the fact that regulators are first and
  foremost enforcement agencies.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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