Legislation set to hit the UK could see individuals put away for up to ten years if they are found guilty of offering what could be described in anyway as a ‘bribe’. In an industry that has long operated on a system of discounts, deals and corporate away days could agency bosses soon be enjoying a holiday at Her Majesty’s pleasure? The Drum finds out.
If ever there was an industry for which the phrase ‘you scratch my back and I’ll scratch yours’ was invented then it is the media and marketing industry. However, new legislation set to come into effect soon, could possibly bring an end to media companies and marketing agencies doing deals that make them preferred business partners over other less well placed suppliers. According to one lawyer The Bribery Act 2010 “introduces a brave new world and the repercussions could be much wider than Parliament ever intended.”
The Bribery Act 2010 may sound like more needless Labour legislation aimed at cutting down the number of bulky brown envelopes being passed between members of Tony Soprano’s crime family and union officials, but in fact the new laws aim to transform the rules by which legitimate businesses can seek to influence or curry favour with clients and customers.
The new rules will not only strike at the stereotypical image of the cash in a brown envelope, but could also cover offering discounts on purchases or provision of overly generous corporate hospitality aimed at securing a business contract.
So, why has this legislation come into force now and is it really such a huge issue? Well, the World Bank clearly thinks that bribery is an issue. It recently estimated that there was $1 trillion worth of bribes being offered and received every year worldwide. So, what the hell is this new act all about?
In simplest terms, the Act introduces four new categories of offence, and remember where it says ‘bribe’ it no longer simply refers to brown envelopes stuffed with dosh. The four categories are:
- Offering, promising or paying a bribe;
- Requesting, agreeing to or receiving a bribe;
- Bribing a foreign public official with the intention to influence that person to retain or obtain business (an offence will be committed if a deal is done with someone other than the official, but it is at the official’s request or with the official’s knowledge); and
- A ‘corporate offence’ of failing to prevent bribery being carried out by an ‘associated person’, which is widely defined to include employees, agents and subsidiaries.
So, in layman’s terms, what does all that mean for media and marketing businesses that regularly negotiate favourable discounts on behalf of themselves and clients?
Diane Turner, a lawyer at Glasgow law firm Burness, says: “A bribe does not have to be the traditional cash in a brown envelope. Any type of improper advantage, benefit or reward to induce another person or organisation to do business or purchase its services can be considered a bribe. Legitimate business has to be allowed to continue. Bulk discounts and sales incentives are a normal and justifiable part of the business environment. Issues only arise where the advantage gained is an ‘improper’ one.
“The negotiation of a bulk discount per se may not be an ‘improper’ advantage or incentive unless it is linked to personal, rather than corporate, gain for the person granting or receiving the discount.
“Discounts dependant upon a favourable rate being offered only to that customer and no other customer could fall foul of competition law in addition to this new legislation. However, a discount which would be available to anyone purchasing that quantity of goods or services may not. Transparency in sales promotions and incentives combined with record keeping of discounts and the reasons for granting them will help to protect organisations.
“Where this whole issue becomes less clear would be, for example, if a ‘sweetener’ was issued to the sales agent to increase the discount or to the purchaser for making the deal - such as buy £1m of advertising at the discounted rate and we’ll throw in a holiday or if you give me 25% discount I’ll buy £1m worth and I’ll take you to the Monaco Grand Prix. The issue then becomes whether the incentive is intended to act as an improper inducement.”
It is clearly an issue which some agencies have already begun to address. Ten Alps Communications recently organised a seminar on the Bribery Act and has set up a website, www.thebriberycentre.co.uk, to help businesses get their heads around what this could mean for them.
Stuart Brown, MD of Northern Units at Ten Alps, said: “The Act was passed as part of the ‘wash up’ at the end of the last parliament and as such received very little notice or media coverage. The subject matter is also hugely misunderstood. The UK has an attitude that all too often believes that Bribery is only conducted by others and within the dark recesses of international trade. That is not only wholly and dangerously incorrect; it is the direct result of a total misunderstanding of what constitutes Bribery under the Act. The challenge now is to educate the UK business community as to the reality of the act and the potential impact on business both at home and abroad.
“Creatively led businesses are very interesting. This is due to the fact that they tend to rely on a greater level of inter personal relationships and collaboration than say a manufacturing business and as traditionally a creative type is less comfortable within a strict process environment then this can create a higher level of risk for that business. In addition creative brand value is often based upon the agency principals or individual staff, so personal reputation becomes a key contributor to corporate reputation and again reputational risk must be addressed as part of an effective compliance plan.”
Clearly, the implementation of this new legislation could become a proverbial pain in the backside, but perhaps when you hear what the penalties could be for falling foul of the legislation it might just be worth your while, as they are pretty severe.
An offence under the first three categories is punishable by an unlimited fine or up to ten years imprisonment if committed by an individual. The corporate offence is punishable by an unlimited fine and further action can be taken against directors, senior officers or managers where the offence took place with their consent.
So, with the above in mind, what should companies be doing now to ensure that they do not accidentally fall foul of the new Bribery Act 2010?
Turner says: “There needs to be a strong commitment from the top level of organisations to ensure that procedures are put in place. Training will need to be given to ensure that all staff, at every level, are made aware of the issue and there is an effective means of monitoring activities.
“Subsidiaries, agents and distributors must be made aware of anti-bribery policies and adherence to them should be a condition of doing business.
“Organisations should implement policies on gifts and hospitality. Burness’ corporate crime defence team is actively advising clients on how best to manage risk under the Bribery Act 2010 and ensure compliance is achieved.”
So, before you fire off that next email offering a golf weekend to that prospective client, just think again because a quick 18-holes could end up as ten years behind bars.