Stephen Blake, head of the Cartels and Criminal Group at the UK's Competition and Markets Authority (CMA) recently warned that individuals convicted of cartel offences should expect prison sentences, and confirmed that the CMA is "working on a number of intelligence leads, with a view to opening further cartel cases in the coming months[1] ."

Undeterred by the recent jury acquittals of Nicholas Stringer and Clive Dean, two individuals accused of price fixing, this statement underlines the CMA's continued commitment to tackle cartel infringements through the criminal justice system.

Convicting individuals of the criminal "Cartel Offence" in the UK

To date, individuals in the UK have only been convicted of the criminal "Cartel Offence" where they have pleaded guilty to the crime.

Neither the CMA, nor its predecessor, the Office of Fair Trading, has been able to secure a criminal conviction against an individual pleading their innocence. In this respect, the UK's criminal regime has more or less existed in the shadow of the UK's well established and parallel civil law regime, under which corporate entities are subject to investigation and fines.

However, both the government and the CMA are keen to redress this balance. Recent changes to the law, in combination with significant investment in the CMA's investigative capabilities[2] are intended to eliminate the main obstacles previously faced by the CMA when bringing criminal prosecutions.

Individuals convicted under the Cartel Offence may face:

  1. up to five years imprisonment; and/or
  2. an unlimited fine; and/or
  3. director disqualification for up to fifteen years; and/or
  4. the confiscation of assets pursuant to the Proceeds of Crime Act 2002;[3] and/or
  5. an order requiring that they pay all or some of the costs of the prosecution.

The judiciary's willingness to make full use of these penalties is clear: in the Marine Hose[4] case, three individuals who pleaded guilty to involvement in a cartel received custodial sentences ranging from 20 to 30 months (as reduced on appeal), director disqualifications of between five and seven years, and two of the three individuals were ordered to repay a total of more than £1 million under the Proceeds of Crime Act 2002. The remaining individual was ordered to pay £25,000 in respect of the costs of the prosecution[5].

Changing the law to secure convictions - removing the 'dishonesty' requirement

Previously, the Cartel Offence required prosecutors to prove that the activity in question had been carried out 'dishonestly'. In practice, this meant that a jury needed to believe that:

  • according to the ordinary standards of reasonable and honest people, what was done was dishonest; and
  • the defendant must have realised that what was being done was by those standards dishonest[6].

This proved extremely difficult to establish in practice (as amply demonstrated by the Stringer and Dean acquittals), and 'dishonesty' was removed as a requirement of the Cartel Office by the Enterprise and Regulatory Reform Act 2013.

As a result, for offences committed on or after 1 April 2014, prosecutors need only prove that the individual agreed with one or more persons to make or implement (or cause to be made or implemented) certain prohibited arrangements (namely: price fixing; bid rigging; agreements to restrict production or supply; and agreements to allocate markets or customers) relating to at least two undertakings at the same level of the supply chain (i.e. between actual or potential competitors)[7].

Where this has been established, it is then for the individuals charged with the offence to prove that they are entitled to rely upon a limited exemption or defence.

This marks a considerable reduction in the evidential burden for prosecutors and takes the vexed 'dishonesty' question out of the equation. The evident policy aim is to make it easier to pursue criminal prosecutions of individuals, as well as companies under the parallel civil regime.

Increasing the CMA's investigative firepower

In keeping with this, the CMA has bolstered its Cartels and Criminal Group (CCG), with the explicit intention of increasing enforcement action against cartels, both under the civil regime (companies), and the criminal regime (individuals)[8].

Over the past year, the CCG has almost doubled in size, growing from 58 to (an estimated) 105 permanent members of staff, with new appointments made across a range of specialisms, including digital forensics and investigation and intelligence gathering[9]. The improvements in resource, expertise and funding may be expected to lead to increasingly sophisticated methods of intelligence gathering, which in turn may result in compelling evidence being presented at trial.

For example, the recent trial of Nicholas Stringer and Clive Dean saw the CMA present in evidence a covert recording of an alleged cartel meeting, and the use of covert surveillance is expected to be a feature of the CMA's future enforcement activities.

Engaging with compliance concerns

Importantly, the CMA's leniency programme provides a clear incentive for individuals and companies to proactively approach the CMA to report cartels.

For example, the CMA's leniency programme expressly provides that, in certain circumstances, individuals will receive guaranteed immunity from criminal prosecution (as well as director disqualification) where they provide information which, at a minimum, gives the CMA a sufficient basis on which to take forward a credible investigation.

Similarly, the programme also provides for the possibility that, in certain circumstances, a cooperating company will receive guaranteed immunity from financial penalties, with its employees or officers receiving guaranteed immunity from criminal prosecution (as well as director disqualification).

With the CMA publicising the possible launch of cartel investigations (and presumably keen to explore the boundaries of the newly reformed Cartel Offence), both individuals and companies that suspect they may be at risk of being implicated in allegations of wrongdoing are well-advised to consider their exposure, and to take appropriate action and advice at the earliest possible opportunity.

Footnotes

[1] Blake, S., "Criminal cartel enforcement after galvanised steel tanks", 29 September 2015.
[2] CMA Annual Report and Accounts 2014-15 (for the year ended 31 March 2015), p. 25.
[3] Section 190 of the Enterprise Act 2002 and part 2 of the Proceeds of Crime Act 2002.
[4] R v Whittle, Brammer & Allison [2008] EWCA Crim 2560.
[5] See https://www.gov.uk/cma-cases/marine-hose-criminal-cartel-investigation
[6] See R v Ghosh [1982] EWCA Crim 2.
[7] Section 188 of the Enterprise Act 2002, as amended by section 47(2) of the Enterprise and Regulatory Reform Act 2013.
[8] CMA Annual Report and Accounts 2014-15 (for the year ended 31 March 2015), p. 22.
[9] CMA Annual Report and Accounts 2014-15 (for the year ended 31 March 2015). One example being the recruitment of David Harper as a director in late-2014, after 30 years with the Metropolitan Police.

"Renowned for her experience in high-profile cartel investigations", partner and head of the Competition and EU team, Bernardine Adkins has represented parties in a number of high-profile investigations in the UK over the past 20 years, recently contributing the UK chapter to Chambers and Partners' "Cartels 2015" publication.

Bernardine leads the firm's 20-strong dawn raid response team of civil and criminal law specialists and IT experts, which is located across London and Birmingham, and is one of the largest in the UK.