Breaking new ground: competition law and director disqualification in the UK

01 December 2016


The UK's national competition authority, the Competition and Markets Authority (CMA), has today announced its acceptance of a binding disqualification undertaking given by an individual not to act as a director of any UK company for a period of five years. [1]

This marks the first time that the CMA has exercised its statutory director disqualification powers under the Company Directors Disqualification Act 1986.[2]

These powers enable the CMA to seek the disqualification of an individual from holding company directorships in the UK, in circumstances where that individual has been a director of a company that has infringed UK and/or EU competition law.

Under these powers, the CMA may apply to the court for a disqualification order against an individual, or accept a binding disqualification undertaking from an individual, with the maximum period of disqualification being 15 years.

Posters and frames: the CMA's investigation

The disqualification undertaking accepted by the CMA was provided by an individual who had previously acted as the managing director of Trod Limited ("Trod"), an online supplier of posters and frames based in the UK.

Following an application for immunity by one of Trod's competitors, GB eye Ltd ("GB Posters"), the CMA commenced an investigation in September 2015 into arrangements between Trod and GB Posters.

The CMA found that the parties had infringed UK competition law by arranging not to undercut each other's prices for certain posters and frames sold via Amazon UK, with the arrangements lasting for more than four years.[3]

As the successful immunity applicant, GB Posters did not receive a financial penalty in respect of its involvement in the infringement. However, Trod was fined around £164,000 by the CMA, with this fine including a 20% reduction in light of Trod entering into a settlement agreement and admitting the infringement.

In a separate investigation launched by the US Department of Justice, Trod pleaded guilty in the US in August 2016 to conspiring to fix the prices of posters sold online.[4]

Individual liability: director disqualification and the Cartel Offence

Following this investigation, the CMA considered that the conduct of Trod's managing director - who the CMA had found had personally contributed to the infringement of UK competition law - rendered him unfit to act as a company director for a specific period of time.

After the CMA indicated its intention to seek a director qualification order, the individual in question opted to give the CMA a binding disqualification undertaking.

Conversely, the CMA did not seek any director disqualification orders in relation to GB Posters. This follows the CMA's leniency policy, which provides that the CMA will generally not seek disqualification orders against directors of a company benefitting from leniency (in respect of the activities to which leniency relates).

Importantly, the CMA's announcement should be seen as a continuation of a policy step-change in the UK, which seeks to ensure that individuals are held responsible for anti-competitive conduct.

Against this background, the CMA has actively grown its Cartels and Criminal Group, with the express intention of increasing enforcement action against cartels, under both the civil and the criminal regimes.

Further, the reform of the criminal Cartel Offence, which we have considered previously, intentionally lessens the evidential burden upon the CMA when seeking to prosecute individuals, with the aim of enabling a greater number of successful prosecutions to be brought in the UK.

Engaging with compliance concerns at an early stage

As highlighted in the investigation into posters and frames, the CMA's leniency programme provides an obvious incentive for individuals and companies proactively reporting cartel to the CMA.

Moreover, with the CMA increasingly active in its enforcement efforts, individuals and companies would be well-advised to consider carefully any potential exposure, and take appropriate action and advice at the earliest possible opportunity.

Our competition law & antitrust team acts on high profile cartel investigations, and frequently advises clients upon making immunity and leniency applications. In addition, with a 20-strong Dawn Raid Response team of civil and criminal law specialists, as well as IT experts, located across our UK offices, clients rely upon us to deal effectively with the most complex of competition investigations. Our presence in Birmingham and London means that we are positioned to respond immediately, providing vital support at sites across the country, when clients need this most.

Footnotes

[1] www.gov.uk/government/news/cma-secures-director-disqualification-for-competition-law-breach
[2] See sections 9A to 9E of the Company Directors Disqualification Act 1986
[3] https://assets.publishing.service.gov.uk/media/57ee7c2740f0b606dc000018/case-50223-final-non-confidential-infringement-decision.pdf
[4] https://www.justice.gov/opa/pr/online-retailer-pleads-guilty-fixing-prices-wall-posters


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