Fostering relationships with regulators

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.