Directors: A warning from the CMA - Competition law compliance matters

13 April 2018

On 10 April 2018, the UK's Competition and Markets Authority (CMA) announced the disqualification of two directors in connection with a company's involvement in a cartel.

This is the second occasion in the last 18 months in which the CMA has secured director disqualifications in respect of companies' infringements of UK and/or EU competition law.

This most recent case highlights the CMA's policy of holding directors personally responsible for competition law compliance, and confirms that company directors risk disqualification when the law is breached.



Collusion amongst estate agents in Burnham-on-Sea

In May 2017, the CMA found that six estate agent companies had entered into an anti-competitive arrangement.

Under the arrangement, the companies set a minimum level for the commission fees they charged on residential sales in and around Burnham-on-Sea in Somerset, England. The arrangement lasted from February 2014 to February / March 2015, and pursued the goal of restricting price competition between the six competing companies..

The CMA ultimately fined five of the six companies a total of £370,084; the sixth company was the first to apply for leniency, and was granted immunity from financial penalties by the CMA.

Two other companies were subsequently granted leniency by the CMA under its leniency programme, and received reductions of 35% and 15% on the fines they received as a result.

Directors' personal liability for companies' competition law infringements

As outlined in our previous update, where an individual is a director of a company that has infringed UK and/or EU competition law, the CMA can seek to disqualify that individual from holding company directorships in the UK.

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

In the Burnham-on-Sea estate agents case, the two individuals in question have given undertakings to the CMA, effectively disqualifying them from acting as directors for periods of 3 and 3.5 years.

While the CMA does not presently intend to seek the disqualification of the directors of the three companies that were granted leniency, it is considering whether to do so in relation to the directors of the other two companies involved in the infringement.

However, director disqualification is not the only sanction against individuals available to the CMA. In addition to director disqualification, the CMA is also able to prosecute individuals under the criminal Cartel Offence[1] . As we have considered previously, the Cartel Offence has been reformed to lessen 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.

Achieving "top down" compliance through sanctions against directors

In taking action against directors, the CMA is emphasising the importance of achieving a "top down" culture of competition law compliance within organisations.

Moreover, the CMA's press release in relation to the most recent disqualification announcement highlights the significance of competition law compliance to company directors:

"[This] should send a clear message to directors that if their companies breach competition law they risk personal disqualification".[2]

This message is also writ large in the CMA's recently adopted Annual Plan 2018/19, which provides that:

"In appropriate cases, we will continue to seek disqualification of directors of companies that breach competition law, to ensure that unsuitable individuals cannot serve as company directors and in the most serious cases, we will pursue criminal prosecutions".[3]

Engaging with compliance concerns at an early stage

The Burnham-on-Sea estate agents case also emphasises how the CMA's leniency programme provides obvious incentives for individuals and companies to be proactive in providing the CMA with information regarding anti-competitive arrangements.

With the CMA increasingly active in its enforcement efforts - and now in receipt of an additional £2.8 million per annum of Government funding, specifically allocated "to stamp out anti-competitive practices"[4] - parties would be well-advised to consider carefully any potential exposure, and take appropriate advice at the earliest possible opportunity.

Our EU, Trade & Competition team advises clients upon achieving their commercial aims in compliance with UK and EU competition law. The team also 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] Section 188 of the Enterprise Act 2002
[2] See, CMA press release "Estate agent cartel directors disqualified"
[3] See, CMA Annual Plan 2018/19, section 2.17
[4] See, Autumn Budget 2017


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