Sonya Branch speaks about the cartel offence and the CMA
Sonya Branch's speech to the Business Crime – 2014 Conference.
Competition, the revised cartel offence and the CMA – a new landscape
Good afternoon and thank you for giving me the opportunity to speak here today ((1) – please see footnotes at the end).
The launch of the Competition and Markets Authority (CMA) in April of this year has provided an important opportunity to draw attention to the UK competition regime and the need for individuals and businesses to comply with the law. As you may know, the CMA has a broad remit covering merger control, market studies and investigations, core aspects of consumer protection law, and both competition and consumer enforcement. As the CMA’s Executive Director of Enforcement, I am responsible for leading the CMA’s consumer protection law and both criminal and civil competition enforcement investigations – investigations which play an important role in ensuring that markets work well for consumers and for businesses.
Today, I plan to speak about the impact of some of the recent reforms under the Enterprise and Regulatory Reform Act 2013 (ERRA), focusing on the reform of the UK competition regime and its institutions. I will consider how these changes are likely to impact in particular the cartel enforcement work of the CMA, highlighting the ways in which the CMA is pursuing its ambition to evolve fully into a mainstream enforcement agency.
I will cover, in particular, 5 key themes:
- a recap of the role of the CMA
- an overview of the CMA’s enforcement priorities
- a summary of recent changes to the criminal cartel offence
- why the CMA attaches importance to the building of strong relationships with other enforcement agencies
- some insights into the CMA’s evolving intelligence and investigative functions
Finally, I would like to take a little time to focus on the CMA’s compliance initiatives – which we also see as a key priority and an important complement to our enforcement work. The CMA is looking significantly to broaden the reach of its compliance work, and I would like, therefore, to take this opportunity to outline some of the ways in which we can help businesses and individuals to comply with the law.
The role of the CMA
I will begin by setting the context for the CMA’s cartel enforcement work. Competition is a vital contributor to economic growth. A strong competition regime contributes to open, well-functioning markets, rewarding businesses that innovate to satisfy consumers, encouraging new entry and investment and ensuring that the terms of competition are fair for all.
Cartels are a major barrier to open, well-functioning markets. They artificially increase prices for purchasers (whether consumers, businesses and/or government), reduce output, reduce innovation, disincentivise efficiency and lead to consumer harm. Indeed, academic research suggests that cartels can inflate prices in a market by as much as 30% or more.
The key responsibility for ensuring strong competition in the UK now rests with the CMA, which was established by the ERRA and took its new powers on 1 April 2014. The CMA brought together the functions of the Competition Commission and parts of the Office of Fair Trading (OFT).
First and foremost, the CMA’s mission is to make markets work well in the interests of consumers, business and the economy.
To deliver this mission, the CMA has set itself 5 key, strategic goals (2). Delivering effective enforcement is at the core of two of these goals and integral to the others and will clearly be key to the CMA’s success and credibility. In particular, effective enforcement of competition and consumer law is vital to ensure open, well-functioning markets for consumers and for business. Consumers are at the heart of everything the CMA does and this is reflected in our choice of work, the way we carry it out, and the impact we want to achieve.
The CMA places a particular emphasis on the importance of effective cartel enforcement, and the government is committed to ensuring that the CMA is well placed to pursue this aim. We have, as a result, seen the reform of the cartel offence to make it easier to prosecute. The CMA has also been provided with additional Treasury funding to enable it to deliver a ‘step change’ in terms of the scale and sophistication of its cartel enforcement activities. This investment will enable the CMA to continue – and accelerate – its current evolution in becoming more effective in detecting and taking action against cartels, in developing a more intelligence-led approach and becoming a key partner in the UK enforcement landscape.
I will speak more about this evolution later, but first let me give you a little more detail about the CMA’s enforcement priorities, before going on to discuss the key elements of the cartel offence itself.
Enforcement priorities
Our goal for our enforcement work is to deliver a steady stream of robust, high-quality cases, meeting challenging performance targets based on international and historical comparisons so that we can justifiably claim to be a world-leading authority in our field. We are committed to using the full range of our tools; the CMA aims to balance the use of tough civil and criminal sanctions with compliance and awareness-raising work, helping the vast majority of firms to compete on a fairer basis and to do so within the law. I will say more about our compliance initiatives later.
In our enforcement work, we choose carefully which cases to prioritise and progress. This will depend on the available evidence, but also on the likely benefit to consumers, balancing the potential impact and significance of enforcement action against risk and reward. This does not mean, however, that only agreements involving businesses of a certain size and/or based in London or other major business centres will be the target of robust enforcement action. Indeed, this has never been the case. Rather, the CMA aims to have a balanced portfolio of cases, covering sectors from across the economy and firms of different sizes and in different geographic areas. This is reflected in our current portfolio of criminal cases, which involve firms of a mixture of sizes, industries and geographical locations. As this and previous enforcement action has demonstrated, no one is immune.
I have mentioned that the CMA has a particular focus on the importance of effective cartel enforcement; however, it should be noted that the CMA will prioritise the full range of cartel conduct. Whilst I will be concentrating today on the criminal cartel offence, the CMA is not only interested in pursuing such criminal cases – it will also vigorously pursue civil enforcement, where the civil infringement but not the criminal cartel offence is engaged. This also extends to non-cartel competition law infringements, such as the abuse of dominance.
The cartel offence
My third theme is a summary of the key elements of – and recent changes to – the criminal cartel offence (3).
The cartel offence applies only to individuals and has the aim of criminalising and deterring behaviour leading to the most serious and damaging forms of anti-competitive agreements: ‘hard-core cartels’.
It applies where an individual agrees with one or more other persons to make or implement, or to cause to be made or implemented, arrangements that relate to at least two undertakings and are of a ‘relevant kind.’ The relevant kinds of arrangement are ones that (if operating as the parties intend) amount to:
- price-fixing
- market or customer sharing
- agreements to restrict production or supply
- bid-rigging
The consequences for persons convicted of the cartel offence are serious. They may be subject to:
- up to 5 years’ imprisonment and/or an unlimited fine
- director disqualification for a period of up to 15 years (4)
- the confiscation of assets under the Proceeds of Crime Act 2002
In the marine hose case (5), for example, 3 individuals were convicted and sentenced to terms of imprisonment of between 20 months and 2 and a half years, as well as being disqualified from acting as company directors for periods of between 5 and 7 years. Two of the defendants were also the subject of confiscation orders totalling over £1 million. The third defendant was ordered to pay costs.
The criminal cartel offence sits alongside the prohibitions on anti-competitive agreements under EU and national competition law, which the CMA (along with the European Commission and the UK sectoral regulators) is also responsible for enforcing (6). By contrast to the cartel offence, the civil regime is directed at businesses (‘undertakings’).
The consequences of civil enforcement action are also significant:
- undertakings face penalties of up to 10% of their worldwide turnover
- individuals may be subject to director disqualification for a period of up to 15 years (7)
- an infringement decision will enable follow-on actions, and thus possible third party damages
For example, a fine of £58.5 million was imposed on British Airways in 2012 in the airline passenger fuel surcharges civil case (8), and in 2011 a £28.59 million fine was imposed on the Royal Bank of Scotland in the loans for professional services firms case (9 and 10).
The criminal cartel offence is framed more narrowly than the prohibitions on anti-competitive agreements in the civil regime:
- it does not cover conduct that falls short of an agreement but that would amount to a concerted practice (11)
- it applies only to reciprocal (12) horizontal arrangements (at least 2 of the undertakings to which the arrangement relates must be operating at the same level of the supply chain) (13)
- only individuals who are knowingly party to the arrangement will commit the offence (14)
Cartel cases may be investigated by the CMA exclusively under the criminal or civil regime, or under both in parallel. Where appropriate, the CMA may investigate a case under the criminal regime whilst, for example, the European Commission or a UK sectoral regulator takes forward an investigation under the civil regime (15). I will speak further about such parallel investigations, in the context of the CMA’s extensive efforts to build stronger relationships with other national and international enforcement agencies.
Cartel red flags
In terms of detecting cartel activity, experience shows that this risk lies in a number of common situations, namely:
- in sectors that are in decline
- where there have been changes in market conditions, for example, where a new business enters a sector or where there are unexpected rises in input costs
- in sectors where ‘everyone knows each other’
- in public procurement processes, which can be vulnerable to bid rigging
In addition, many cartels have been found in the construction and transport sectors, and in other such basic or heavy industries (for example, chemicals, ball bearings and cement), in a number of jurisdictions.
However, as I highlighted earlier when speaking about the CMA’s enforcement priorities, the CMA’s experience is that cartel activity is by no means limited to particular industrial contexts, ‘big business’ or particular sectors.
In view of the scope of this conference, I should also mention that the facts giving rise to the criminal cartel offence can of course overlap with other forms of economic crime, such as bribery and corruption. For example, bid rigging might include bribery of a corrupt procurer or agent or others ‘on the inside’, or cartelists might make ‘compensation payments’ to each other in exchange for cartel involvement. Cartel activity might also be associated with fraud. For example, cartelists might rig bids or fix prices, and then falsely represent to the purchaser that their bid or price was reached independently. More broadly, experience shows that businesses involved in other forms of economic crime can be involved in cartels and vice versa, cartels can be an indicator of a corporate culture of rule-breaking (16).
Where there are overlaps with other forms of economic crime, other agencies such as the Serious Fraud Office (SFO) may investigate conduct in parallel with the CMA.
Building relationships
Given the scope for such parallel investigations, the CMA has placed particular importance on building resilient and collaborative relationships with other national and international enforcement agencies from its start. We fully recognise that the CMA’s enforcement goals and ambitions cannot be achieved in isolation and, for example, cases may be run in parallel with, or referred by the CMA to, other UK and overseas agencies. A successful enforcement regime benefits from close cooperation with others and – quite simply – the CMA will achieve better enforcement through combining efforts and sharing best practice.
We continue, therefore, to build relationships and work increasingly closely with national agencies such as the police, the National Crime Agency, the SFO, the Financial Conduct Authority and Trading Standards. The CMA benefits from being part of this wider intelligence and enforcement network.
We are also building on existing relationships with key enforcement partners within the Devolved Nations. For example, the CMA has worked closely with the Crown Office and Procurator Fiscal Service (COPFS) in Scotland and the Crown Solicitors Office in Northern Ireland in obtaining and executing criminal cartel warrants for business premises in those jurisdictions. Local police forces also assisted with the related searches, including in relation to an arrest in Scotland.
It should be noted that in Scotland prosecutions for the criminal cartel offence can only be brought by the COPFS, which is headed by the Lord Advocate – and it is with the Lord Advocate that the decision to prosecute a criminal cartel offence, and/or grant criminal immunity, rests.
However, we have developed a suitably flexible regime and set of processes to ensure that the CMA and COPFS can work together from an early stage in a CMA investigation effectively in order to maximise the prospects for a successful prosecution (17).
As members of the UK Competition Network, we also share information and make case allocation decisions with national sectoral regulators. Further, as members of the European Competition Network (ECN) and the International Competition Network (ICN), the CMA is similarly able to share information and evidence, disseminate best practice and cooperate on cases with European and international network members.
Indeed, in increasingly globalised markets, where businesses are operating within multiple jurisdictions, cartel conduct may well involve cross-border activity. This may necessitate parallel investigations and enforcement overseas, for example, by the European Commission, other EU national competition authorities and/or other overseas authorities. Such criminal enforcement by other national authorities may – in turn – lead to custodial sentences and the risk of extradition arises (18).
We are growing in our ability and confidence to deal with the potential difficulties raised in such cases, where suspects are based in other jurisdictions. We have already had some success in this sphere, for example using our intelligence to track and arrest a suspect based in the Far East when he was visiting relatives in the UK.
We have also pursued, and are currently pursuing, a number of cases in parallel with the European Commission, and have also worked in parallel with other overseas agencies such as the US Department of Justice.
The marine hose investigation is one excellent example of such international cooperation. That investigation involved a global cartel between all the major suppliers of marine hose. The key elements of this cartel were market sharing, the allocation of customers and bid-rigging, the implementation of a common price list and the operation of a ‘home territory’ principle. The investigation saw parallel investigations and proceedings by the European Commission, the US Department of Justice and other international competition authorities, such as the Japan Fair Trade Commission, along with the UK. It involved coordinated searches of offices and homes, and the arrest of 8 suspects in the US, including 3 UK nationals (the searches and arrests were timed to follow a covertly recorded cartel meeting in Houston). Under a US plea agreement, which was and remains unique, the three UK nationals pleaded guilty in the US but were allowed to return to the UK, to be arrested on arrival at Heathrow by the Metropolitan Police.
This case was a significant milestone in international cartel enforcement, highlighting the UK competition authority’s ability and willingness to work closely with other international enforcement agencies. The CMA will continue to build on this track record through intensive and sustained international cooperation.
The removal of the dishonesty requirement
Returning to a summary of the recent reforms in relation to the criminal cartel offence, the key change to the existing offence was the removal of the dishonesty requirement.
Dishonesty was originally included in the criminal cartel offence in order to provide a signal as to the seriousness of the offence, to exclude the need for detailed economic analysis and evidence, to distinguish the offence from civil competition law, and to ensure that it did not apply to agreements that might have countervailing benefits, making them lawful under civil competition law.
However, the inclusion of the dishonesty requirement also made it considerably harder to bring cases than originally anticipated, thereby undermining its effectiveness as a deterrent: far fewer prosecutions were brought in the decade since the offence came into force than were envisaged.
When the government came to review the specific causes behind the original inclusion of the dishonesty requirement, it found that they were either unnecessary or ineffective. The requirement to prove dishonesty as an element of the cartel offence was, therefore, removed by the ERRA, and statutory exclusions (19) and defences added in its place.
Under the new exclusions, an individual will not commit an offence if certain information (20) is notified to customers (21) or published in a specified form before the relevant arrangements are entered into. In addition, an individual will not commit an offence if the agreement was made in order to comply with a legal requirement (23).
The rationale behind these provisions is to exclude agreements made openly, on the basis that customers who are informed about arrangements can ultimately choose to contract elsewhere.
A similar rationale informs the new statutory defences, which apply where (24):
- the individual did not intend to conceal the arrangements from customers
- the individual did not intend that the arrangements would be concealed from the CMA
- before entering the agreement, the individual took reasonable steps to ensure that the arrangements would be disclosed to a professional legal adviser for the purpose of obtaining advice about them before they were made or implemented
The availability of a defence in the event of a decision to prosecute an individual for the cartel offence will depend in each case on the facts. In the context of the legal advice defence, the CMA has stated that it considers that to demonstrate the requisite reasonable steps there must have been a genuine attempt to seek legal advice on the arrangements (25).
The explicit aim of these reforms is to make the criminal cartel offence easier to prosecute and so more effective as a means of deterring hard-core cartels. Whilst the focus for criminal enforcement is unchanged, it is anticipated that a higher proportion of cases will result in successful prosecution.
However, the amendments are not retrospective and they apply only to agreements made on or after 1 April 2014 to make or implement cartel arrangements made on or after that date. The requirement to prove dishonesty, therefore, remains for existing cases and any future cases which relate to conduct pre-dating April 2014.
Prosecution guidance
To assist businesses and advisers, the CMA has published prosecution guidance on the principles which will be applied by the CMA in determining, in any case, whether proceedings for the amended cartel offence should be instituted (26).
The guidance makes clear the CMA’s intention of focusing its criminal enforcement efforts on prosecuting individuals involved in ‘hard core’ cartels (27) and the removal of the dishonesty requirement does not affect this.
Further, a decision by the CMA that a prosecution should not proceed for the amended cartel offence on either evidential or public interest grounds does not preclude the CMA from considering whether collusive arrangements between undertakings should be subject to civil enforcement action under our other enforcement powers.
Improving detection and investigation
Against this background of reform, the CMA continues to evolve in its approach to cartel detection.
A key but unusual feature of the cartel regime is the power for the CMA to issue ‘no action letters’, which provide individuals with immunity from prosecution (28). Individuals may qualify for such letters in 2 ways:
- under the CMA’s leniency programme, where the business employing the individual has been granted immunity from financial penalties, or lenient treatment, under our civil enforcement regime (29)
- where the individual has directly approached the CMA for a no action letter (30)
It should also be noted that the criminal cartel offence is currently excluded from the SOCPA (31) assisting offenders regime and the scheme for deferred prosecution agreements (32). However, this would not preclude the CMA from entering into an assisting offender agreement under common law (33).
It is undoubtedly the case that the grant of no action letters to individuals, as part of the CMA’s leniency programme, is a key tool for detecting cartels and an important source of intelligence.
But whilst leniency and no action letters are important, these are not the CMA’s only detection tools and nor are they without their limitations. For example, they rely on companies and individuals choosing to come forward and experience suggests that leniency programmes are more likely to catch ‘late stage’ or failing cartels.
Hence the need to complement the leniency policy with an effective and increasingly sophisticated cartels intelligence function to catch cartels at an early stage and thereby minimise consumer harm, as well as provide the ability to investigate and take action without the necessity of using immunised accomplice witnesses. The CMA is, therefore, taking an increasingly proactive approach to cartel detection, and is committed to using the full range of its investigatory powers and resources, including covert investigation powers under the Regulation of Investigatory Powers Act (34).
We are also one of the few competition authorities in the world which has adopted an informant rewards programme, offering rewards of up to £100,000; and we have a dedicated cartels hotline. These are both promoted proactively. In January 2011, for example, we issued a press release seeking information relating to our investigation into suspected price-fixing between UK truck manufacturers, requesting any person with information to contact our cartels hotline, and drawing attention to the informant rewards programme.
And, of course, strong relationships with UK and international enforcement partners provide further opportunities for us to access valuable sources of intelligence.
The CMA makes comprehensive use of its overt investigative powers. These powers include information demands, search warrants and compulsory interviews. The CMA also has access to information flowing from our own market and merger investigations and open-source information.
With additional Treasury funding, we are now investing further in building the CMA’s intelligence, investigation and enforcement capacity to enable it to increase the number and speed of cartel cases that it is able to pursue.
A dedicated investigation function includes a number of senior investigators and intelligence officers with extensive experience in the police and SFO; and we are currently in the process of recruiting a Director of Intelligence and a Director of Digital Forensics and Intelligence. Additional funding is also being used to provide for better intelligence via enhanced and more sophisticated digital and forensic capability.
We are also increasingly drawing on police expertise in the conduct of searches and have, for instance, co-operated extensively with the City of London Police and other police forces, including in Scotland and Northern Ireland, on a number of recent criminal cartel investigations, including with the execution of warrants and the arrest of suspects.
Again, the CMA has had some early success – almost half of the CMA’s new cartel investigations opened since 2010 have been intelligence led. We are also undertaking larger-scale operations such as, for example, the recent execution of search warrants across 7 sites throughout the UK, including Scotland and Northern Ireland, with the involvement of 6 police forces and the simultaneous arrest of 7 individuals. Most recently in the galvanised steel tanks case, two men have been charged with the cartel offence and another has pleaded guilty to the same offence (35).
Some of you may also have seen coverage of the recently concluded CMA prosecution of a pyramid promotion scheme under the Consumer Protection from Unfair Trading Regulations 2008. After a year-long investigation in which almost 300 witness statements were taken and over 5,000 items of material seized and examined, the case, which was adopted by the CMA from the OFT, culminated in two lengthy and hard-fought trials against 11 separately represented defendants, relating to a geographically widespread scheme involving over 10,000 consumers, and which had a value of £20 million. The case concluded with 9 convictions (including guilty pleas from the final senior defendants) and terms of imprisonment, with confiscation proceedings now commenced.
These cases demonstrate the capability we have already developed. In the future and with an even more resilient criminal prosecution function, we expect to be able to handle an even larger number of cartel enforcement cases.
Compliance
Turning to my closing theme, it’s clear that delivering effective enforcement is key to the CMA’s success and credibility. However, as I have flagged, it is important that the CMA has a balanced enforcement portfolio and that we also recognise that enforcement is not an end in itself – the CMA’s main driver is the impact of its work for markets and consumers.
Beyond the benefits for consumers directly affected by the cartel activity in question, and a deterrent effect on those directly subject to intervention, the CMA’s enforcement action can also lead to wider behavioural changes, for example in other markets where similar issues exist, or where our action clarifies the law or leads to consumers being better informed and empowered.
As important as it is that we take strong enforcement action to protect consumers, the CMA needs, therefore, to balance tough sanctions – where appropriate – with compliance and awareness-raising. This is why the CMA also attaches significance to our compliance initiatives.
As with enforcement, the CMA is looking to step up what we can achieve in this area, and to help promote a business environment in the UK with a ‘culture of compliance’. This includes drawing attention to the competition regime, assisting businesses in understanding what our enforcement work means to them, and increasing our own understanding of the drivers of awareness and compliance.
The CMA recognises that most businesses and individuals want to comply with competition law – and we want to support them in doing so. We have created a number of resources in order to help businesses understand what they need to do, and to ensure that the law is better understood across the economy. We have developed, therefore, guidance on competing fairly and the application of competition law, how to identify cartel activity, how small businesses can comply with competition law and the CMA’s powers of investigation of anti-competitive behaviour – all of which can be found on GOV.UK (36).
The CMA is also looking to use compliance work to build on enforcement success, educating industry on key lessons drawn from completed casework. For example, we have already adopted this approach following one of our civil cartel cases: the Mercedes-Benz commercial vehicles case. Working with industry partners, the CMA has recently delivered a programme of actions aimed at ensuring that the key messages coming out of that case are understood and disseminated across the sector. This has included speaking at trade conferences, publishing articles in trade magazines, social media and sending an open letter to the industry, which was distributed by the National Franchise Dealer Association to approximately 80% of the 200,000 people working in franchised car and commercial vehicle dealers in the UK (37).
Another benefit of targeted compliance efforts of this kind is that – to the extent that any wrongdoing remains – we expect that new links and directed engagement with the industry will lead to new intelligence, and ultimately to further enforcement success, in something of a virtuous circle.
Compliance must not be viewed simply as a burden or a box that needs to be ticked in order to mitigate the possibility of sanction. All businesses benefit when the terms of competition are fair (38).
Advisers have a critical role to play in steering companies towards full and effective compliance. The CMA is keen to assist by providing access to useful and effective compliance tools, enabling them to identify and mitigate the specific risks that may be present and to ‘translate’ the legal requirements into behaviours which employees working in the front line can understand and identify. We are, therefore, keen to hear from advisers about how our efforts in this area could be improved and to understand better what their clients would find useful.
Conclusion
I will close by reiterating that the CMA is vigorously pursuing its ambition to evolve fully into a mainstream criminal enforcement agency. Enhanced capabilities and changes in the legislative framework mean that the risk of detection and successful prosecution are increasing for those involved in cartel activity. This in turn makes full and effective compliance more important than ever, but also – where businesses consider that they may be involved in cartel activity – it is increasingly risky not to report the conduct and essential to act quickly, before others do.
Footnotes
- I am grateful to a number of CMA colleagues for their assistance in preparing this speech, in particular, to Ruth Ashworth, together with Emma Lindsay, Lee Craddock and Stephen Blake.
- The CMA’s goals are set out in its Annual Plan 2014/15. They are: to deliver effective enforcement; to extend competition frontiers; to refocus consumer protection; to achieve professional excellence and to develop integrated performance.
- The criminal cartel offence is contained in section 188 of the Enterprise Act 2002.
- Disqualification following criminal conviction may be granted by the court, without the need for a CMA application.
- R v Whittle, Brammer & Allison.
- Chapter I of the Competition Act 1998 prohibits agreements between undertakings, decisions by associations of undertakings or concerted practices which may affect trade within the UK and which have as their object or effect the prevention, restriction or distortion of competition within the UK unless they are excluded or exempt. The Chapter I prohibition is based on Article 101 of the Treaty on the Functioning of the European Union (TFEU), which the CMA must also apply to agreements/concerted practices which may affect trade between member states and have as their object/effect the prevention, restriction or distortion of competition within the internal market.
- On application by the CMA to the High Court. See section 9A of the Company Directors Disqualification Act 1986.
- Case reference CE/7691-06.
- Case reference CE/8950/08.
- Since this speech was delivered, the Competition Appeal Tribunal published an order in October 2014 consenting to the withdrawal of a damages action brought by the UK Ministry of Defence against British Airways (The Ministry of Defence v British Airways plc) following agreement of terms of settlement. These proceedings were brought by way of a follow-on action to the OFT’s infringement decision.
- For example, the unilateral disclosure of confidential, commercially sensitive pricing information (a classic example of an anti-competitive concerted practice) was the subject of the loans to professional services firms case, and found to be an ‘object’ infringement under civil competition law. By contrast, the exchange among competitors of confidential future pricing information would not in and of itself be caught by the offence (although it may be evidence of an underlying agreement by which the offence is committed).
- By virtue of section 188(2)(a) to (c) and section 188(3) of the Enterprise Act 2002.
- The offence will not therefore be committed in the case of arrangements that, for example: contain unilateral restrictions (that is, restrictions on only one party); contain restrictions on more than one party but that do not relate to the same level of the production or supply chain; do not contain restrictions that relate to the pricing, supply or production of a product or service, or to bid-rigging arrangements.
- These individuals do not need to be connected to the undertakings to which the agreement relates: any individual who agrees to facilitate or assist cartel arrangements may be at risk of prosecution. The key question is not whether an individual was involved in the arrangement, or whether they themselves had contact with competitors, but whether they agreed to play their part in the scheme, knowing of its extent and outcome.
- Where the European Commission or sectoral regulator is best placed to take the civil investigation forward.
- For example, one of the companies involved in the marine hose cartel case was also found to have been involved in a separate conspiracy to make corrupt payments to Latin American government officials, in relation to which it pleaded guilty in the US courts and was fined US$28 million in 2011.
- Joint working is underpinned by a memorandum of understanding which sets out the way in which the CMA and COPFS cooperate to investigate and/or prosecute individuals in respect of the cartel offence. See ‘Cartels: raising the stakes’ Lindsey Miller and Emma Lindsay, ‘The Journal Online’, 2 July 2014.
- For example, on 4 April 2014, the US Department of Justice announced the first successful extradition of a foreign national to the US to stand trial for alleged breaches of US antitrust law. Romano Pisciotti, an Italian national, will face charges for allegedly participating in the marine hoses cartel. He was a former executive with Parker ITR Srl, headquartered in Italy, and was extradited from Germany.
- The notification exclusion (Enterprise Act 2002, subsection 188A(1)(a)) and the publication exclusion (Enterprise Act 2002, subsection 188A(1)(c)).
- This ‘relevant information’ comprises the names of the undertakings to which the arrangements relate; a description of the nature of the arrangements which is sufficient to show why they are or might be arrangements which fall within the scope of the offence; the products or services to which they relate; and any other information as may be specified in an order made by the Secretary of State.
- The notification exclusion will not be satisfied if customers are merely provided with a broad general disclaimer that the agreements may contain price-fixing/market sharing provisions.
- In one of the London Gazette, the Edinburgh Gazette or the Belfast Gazette: Enterprise Act 2002 (Publishing of Relevant Information under section 188A) Order 2014 (SI 2014/535).
- Enterprise Act 2002, subsection 188A(3). A legal requirement is a requirement: imposed by or under any enactment in force in the United Kingdom; imposed by or under the TFEU or the European Economic Area Agreement and having legal effect in the United Kingdom without further enactment; or imposed by or under the law in force in another EU member state and having legal effect in the United Kingdom.
- Enterprise Act 2002, section 188B.
- See paragraph 4.24 of the CMA’s Cartel Offence Prosecution Guidance.
- The CMA applies the Full Code Test under the Code for Crown Prosecutors (the Code) when deciding whether any individual should be charged. Under the evidential stage of the test, the CMA must be satisfied that there is sufficient evidence to provide a realistic prospect of conviction against each suspect. It must be satisfied that the evidence is admissible, reliable and credible. It must also consider what the defence case may be and how it is likely to affect the prospects of conviction. See paragraphs 4.1 to 4.10 of the Cartel Offence Prosecution Guidance. If the evidential stage is passed then the CMA will go on to consider whether a prosecution is in the public interest. This public interest stage requires the CMA to conduct a weighing-up exercise of public interest factors: the weight of each factor considered will vary according to the facts and merits of the case. The CMA will focus on those cases where the harmful nature of the individual’s behaviour is obvious without the need for any detailed assessment. See paragraphs 4.26 to 4.41 of the Cartel Offence Prosecution Guidance.
- A hard-core cartel is an agreement between competitors to fix prices, share markets, rig bids or limit output at the expense of the interests of customers and without any countervailing customer benefits. Typically, hard-core cartels are secret arrangements under which competitor businesses agree to coordinate their activity, usually in order to preserve or drive up prices.
- Only the CMA can issue no action letters.
- Where there is no prior investigation, immunity is guaranteed for the first to apply, including (where the applicant is a business) for all cooperating current and former employees. Immunity is otherwise discretionary.
- The grant of a no action letter is subject to conditions (including a duty of cooperation which will typically extend to giving evidence against fellow cartelists); and the scope of immunity is limited to the cartel activity particularised in the no action letter.
- Serious Organised Crime and Police Act 2005.
- Under the Crime and Courts Act 2013.
- For example, under common law rules, ‘text’ arrangements may be used. See: R v P Blackburn [2007] EWCA Crim 2290.
- Under this legislation, the CMA can require the production of communications data, carry out surveillance (directed and intrusive), and use covert human intelligence sources (CHIS). These powers are available where it is necessary and proportionate for the purposes set out in the legislation, namely the prevention and detection of crime and/or, in the case of directed surveillance and the use of CHIS, in the interests of the economic well-being of the UK.
- This case is subject to reporting restrictions.
- Competition Act 98 and cartels guidance.
- See ‘Commercial vehicles case cartel enforcement lessons’ and the tweets from the CMA: * Where’s the line between chatting and forming a cartel? * A single meeting can be enough to find yourself part of a cartel * Smaller businesses don’t get a free pass on competition law
- See Alex Chisholm’s speech to the Law Society Competition Section Annual Conference delivered on 16 May 2014: Achieving a culture of compliance.