Are you compliant?
It is important that all businesses are aware of this Standard. The Commerce Commission is likely to use their enforcement powers to force businesses to adopt the Standard. You may be able to avoid the Standard being forced upon you by voluntarily putting an effective compliance programme in place that your business’s needs.
A compliance programme is an essential tool to help you make more money and keep the money you have made. It makes sense to have one. But there may be better programmes for you than the Standard. So it may be best to devise your own compliance programme and implement it now, rather than have the Standard forced upon you.
What is compliance?
Compliance is the result of a business meeting its obligations. Compliance is not a standalone activity - it is integrated into all aspects of a business’s operation. Compliance uses the business’s objectives as a foundation to build policies and procedures that are supported by a compliance programme.
An effective compliance programme will result in a business demonstrating its commitment to compliance with relevant laws, industry codes, organisational standards and standards of good corporate governance, ethics and community expectations.
An effective compliance programme could include:
- Strategic vision
- Risk assessment
- Control points
- Adequate documentation
- Identified positions that are accountable
- Continuous improvement.
Where did the Standard come from?
The Standard originated in Australia. It was first released in 1998, but was widely considered by business and the Courts to have several shortcomings. This reduced its effectiveness.
A revised Standard was written and released in 2006. The 2006 Standard was very different to the one of 1998. The 1998 Standard focused on three main elements of an organisation’s compliance programme - structural, operational and maintenance. In comparison, the 2006 Standard focuses on the principles that address how best an organisation can implement a compliance programme.
The broadly grouped principles are:
- Commitment
- Implementation
- Monitoring and Measuring
- Continual improvement.
It is this standard that the New Zealand Standard is based upon.
Who has enforced the Standard in Australia?
The Australian Securities and Investments Commission (ASIC) and the Australian Competition and Consumer Commission (ACCC) have forced compliance programmes, based on the Australian 2006 Standard, on those businesses who have been considered in breach of the Trade Practices Act (equivalent to our Fair Trading Act 1986). In return, ASIC and ACCC have agreed not to prosecute them. The Australia courts have endorsed the activities of ASIC and ACCC.
Because the ASIC and ACCC have actively looked to force compliance programmes on businesses, it cannot be discounted that the Commerce Commission in New Zealand will look to do the same thing if an investigation reveals a breach (in circumstances where a compliance programme is not in force).
Many consider the Australian approach to the enforcement of compliance programmes to be extreme. And it needs to be remembered that the Standard is a benchmark only.
An effective compliance programme needs to be effective, but for many businesses it does not need to be as costly or burdensome as those the ACCC has forced upon offenders under its enforcement powers.
The New Zealand situation
The New Zealand Standard is basically the same as the Australian 2006 Standard but modified to New Zealand circumstances.
The Commerce Commission is responsible for enforcing the Fair Trading Act 1986. It investigates breaches of the Act, including misleading and deceptive conduct in trade. Enforcement measures imposed by the Commission include investigating suspected breaches of the Act, agreeing settlements with offenders, or taking Court action if settlement is not achieved.
The Commerce Commission supports the Standard. It has already shown a keen desire for businesses to develop and implement compliance programmes. The Standard will provide the Commerce Commission with greater room to insist on a business adopting a compliance programme. New Zealand courts are also likely to endorse the approach adopted by the Commerce Commission.
What can you do in your business to comply?
As a first step, you could develop and implement a compliance programme voluntarily.
Secondly you can create a ‘compliance culture’ in your business. A business with a compliance culture encourages compliance with the law. This is reflected by people seeking to understand and act in accordance with the legal obligations affecting their work.
Your compliance programme does not need to be overly complicated—it can be simple but it must be effective. The Standard could be a good starting point.
Look at what mistakes can arise in your business and focus your compliance programme to reduce or eliminate those mistakes. Examples include overstated advertising claims, inaccurate product descriptions or product availability, incorrect pricing or special offers.
Can a compliance programme help if a mistake is made?
The short answer is ‘yes’. Mistakes happen from time to time, even if you have a compliance programme operating.
Although a compliance programme doesn’t make your business risk-free, having one in place means you will avoid the Commission imposing a compliance programme on you which could be more costly and burdensome.
Act now
Think now about implementing a compliance programme into your business.
It may be a simple matter of reviewing an existing compliance programme and bringing it up-to-date.
Or it may mean starting from scratch to develop a compliance programme that suits your business and its objectives.
There is no one size fits all compliance programme. Every business’s circumstances are different. You may only require a simple programme to implement an effective complaints handling system. At the other end of the scale, you may require team of dedicated compliance staff that conduct regular compliance risk assessments and compliance risk programme reviews in line with detailed guidelines and procedures.
Whatever type of compliance programme you need, it should be well managed, adequately resourced , properly documented and actively supported.
For further information about compliance programmes, visit www.comcom.govt.nz or www.standards.govt.nz. For help with drafting or reviewing a compliance programme, seek legal advice.
Business benefits
Creating a culture of compliance, by embedding a compliance programme into your workplace, can enhance your business. Knowing the risks you face and the measures that are needed to guard against those risks can provide you with a competitive advantage.
Customer service is likely to improve if staff are alert to—and able to—deal with unlawful conduct that your business faces.
Businesses that fall foul of the law can suffer damage to their reputation that can last years. It is difficult to avoid being reminded of breaches many years on, as it can now easily be retrieved by the click of a mouse.
Having a reputation for a compliance culture and compliant practices can only provide benefits to your business.
So, how compliant are you?
An edited version of this article was published in NZ Retail, October 2009.
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Corinne Blumsky
Partner
