The Bribery Act - what does it mean for the retail sector?

As a retailer the Bribery Act 2010 needs to be on your radar. Forget images of brown paper envelopes stuffed full of money - the offence of failure by a commercial organisation to prevent bribery is much more subtle.

How does the Bribery Act affect my retail business?

As a retailer you may have see references to the Bribery Act in the press and thought 'Why do I need to worry about this, I don't give or take bribes?' In fact the Act is very significant for businesses as it creates for the first time an offence of failure by a commercial organisation to prevent bribery. It also creates two general offences, one of bribing another person, the other of being bribed. The final offence relates to bribing a public official. The aim of the Act is to consolidate the patchwork of existing bribery legislation and clarify the position on bribery.

When will the Act come into force?

The Act will come into force on the 1 July 2011. The Act was due to come into force earlier this year, but was delayed. The Secretary of State has issued guidance about procedures that commercial organisations can put in place to prevent bribery. The guidance is extremely significant as in some cases it will be a defence for a business to show that it has adequate provisions in place to prevent bribery. The period between now and 1 July gives a window in which retailers can look at look at putting adequate procedures in place, if their existing procedures do not give them significant protection. 

What is Bribery?

Under the Act, bribery involves offering or promising someone a "financial or other advantage" with the intention that the advantage will either induce someone to "perform improperly a relevant function or activity" or reward the person for their improper performance of such function or activity. There must also be an intention of obtaining or retaining business, or obtaining or retaining an advantage in the conduct of business. It will not matter if the business is conducted in the UK or abroad. The penalties for offences under the Act are very harsh and may involve up to 10 years in prison. The issue for business is that the definition of bribery is very wide and many businesses have been concerned that it could impact on corporate hospitality and promotional expenditure.

So what is the position on corporate hospitality?

In the guidance it does say that there is no intention to criminalise "bona fide hospitality and promotional or other business expenditure which seeks to improve the image of a commercial organisation, better to present products and services, or establish cordial relations..."  However, the guidance does acknowledge that corporate hospitality could be used as a bribe. The key thing to bear in mind in looking at corporate hospitality is proportionality and commonsense. Lavish hospitality is more likely to draw an adverse inference than normal business expenditure. If a key decision maker within a retail business were to accept lavish hospitality from a shop fitter who was tendering for fit-out work, this may well amount to acceptance of a bribe on the part of the retailer and the giving of a bribe by the shop-fitter.

Surely a retailer will not be responsible if someone offers a "bribe" without their knowledge?

Yes, they will unless they can rely upon the defence of having adequate procedures in place. This is a really difficult area for businesses. The Act has a concept of "associated persons". These are people associated with the business, who may be employees, agents, subsidiaries, sub-contractors and suppliers of both services and goods. You could be liable if an associated person bribes another person on your behalf in order to obtain or retain business or an advantage in business for you unless you can prove that they had adequate procedures in place to prevent bribery.

What practical steps can retailers take now?

There are a number of practical steps that retailers can take now:

• Read the guidance produced by the Ministry of Justice. For smaller retailers, reading the 'Quick Start Guide' is a good place to start
• Do a risk assessment of your business. What type of business do you do? Is the risk of becoming involved in bribery high? Do you have policies and procedures in place to prevent bribery? Do you operate abroad? These are all questions which will allow you to asses what procedures will be required for your business. The key here is that your procedures must be proportionate to the risk that you face
• Look at your relationships with "associated persons". Do you need to put clauses in your supply chain contracts to ensure that your suppliers, agents and sub-contractors are complying with the Act and that you have adequate procedures in place? Consider putting clauses in your standard terms and on your website about your commitment to preventing bribery
• Review your corporate hospitality policy. What can be done and accepted by way of corporate hospitality? Keep transparent records of your hospitality expenditure
• Create a "culture of compliance" within your business whereby everyone from management downwards buys into a zero tolerance approach to bribery. Depending upon the risk that you face this may involve staff training, a memo or a statement on your intranet. You may want to have a confidential hot-line for employees to report concerns about bribery
• Undertake regular monitoring of the risk and keep records

We can give further help and practical advice if required. See our website for further information on the Bribery Act.

Tim Richards is a Partner in the Michelmores Business Team. For further information on the issues raised in this article, please contact Time at tim.richards@michelmores.com.