Speech

Stephen Blake on the UK steel tanks criminal cartel case

Speech by Stephen Blake, Senior Director - Cartels and Criminal Group, on this case and the evolution of the UK criminal cartel regime.

• From: Competition and Markets Authority and Stephen Blake
• Published: 13 November 2015

• Location: Stockholm, Sweden
• Delivered on: 13 November 2015 (Original script, may differ from delivered version)

The UK steel tanks criminal cartel trial: implications for criminalisation and leniency

Introduction

Let me start by thanking the Swedish Competition Authority for organising this seminar and for inviting me to share my reflections on the implications of the recent UK galvanised steel tanks criminal case. (1 - see footnotes at the end.) I should preface my remarks by making clear that they relate only to the criminal case, which applied to individuals, and do not concern the Competition and Markets Authority’s (CMA) ongoing civil investigation into whether businesses have infringed the competition prohibitions in the UK Competition Act 1998 (CA98) or the equivalent provisions under EU law; no assumption should be made at this stage as to whether the civil prohibitions have been infringed. (2)

Background

Before turning to the implications of the criminal case, let me start by saying a few words to place it in context.

The UK criminal cartel offence is contained in the UK Enterprise Act 2002 (EA02) and entered into force in June 2003. (3) It applies only to individuals and is designed to complement the pre-existing civil (administrative) regime under the CA98 and its EU equivalent, which is directed at businesses (‘undertakings’). (4) Save with the consent of the CMA, only the CMA or the Serious Fraud Office (SFO) may prosecute the criminal cartel offence in England and Wales, or in Northern Ireland. In Scotland, prosecutions are brought on behalf of the Lord Advocate by the Crown Office and Procurator Fiscal Service (COPFS), which is the sole prosecution authority in Scotland. (5)

The aim of the offence is to deter individuals from engaging in conduct that results in the most egregious and damaging forms of anti-competitive agreements, namely ‘hard-core’ cartels. These are almost invariably secret arrangements under which competitors agree to fix prices, share markets or customers, restrict production or supply, or rig bids, in each case at the expense of customers and without any countervailing customer benefits, usually in order to preserve or drive up prices. (6) As well as making individuals personally accountable, the criminalisation of such conduct also serves to underline its serious detrimental effects, which cheat customers of the benefits of competition, as well as damaging the wider economy.

This reasoning was reflected in the 2001 competition white paper (7) which preceded the introduction of the offence, in which the government concluded that without increasing fines to a disproportionate level, fining businesses alone was insufficient to deter hard-core cartels and that sanctions against individuals were required on the basis that “the threat of a criminal conviction and the possibility of a prison sentence means that individuals are more likely to think very carefully before engaging in cartels”. (8) At the same time, the government cited the experience in the US where, the white paper concluded, the availability of criminal sanctions had helped to raise the profile of competition law within the business community and noted that, as a result, “the importance of strong competition between firms is much more ingrained in the US than in the UK”. (9)

Consistent with this, the introduction of the cartel offence was accompanied by stiff penalties for those convicted of the offence, which include imprisonment of up to 5 years, as well as an unlimited fine. In addition, where an individual convicted of the offence has benefited personally from their involvement in the cartel their assets may be the subject of a confiscation order under the Proceeds of Crime Act 2002. Company directors may also be disqualified from being involved in the management of a company for up to 15 years. (10)

Unusually for a UK criminal statute, the EA02 also makes provision for the CMA to grant immunity from prosecution for the offence through the issue of a so-called ‘no-action letter’. This is an important element in the design of the criminal statute as it has allowed the CMA, and its predecessor organisation, the Office of Fair Trading (OFT), to adopt a criminal immunity policy under which an undertaking which is the first to report cartel activity that is not already under investigation can be certain not only of being granted immunity from fines under the civil regime, but also that its current and former directors and employees will not be prosecuted for the cartel offence, in each case provided they meet the conditions for immunity under the policy. (11) Without this upfront certainty, the criminal offence would almost certainly act as a disincentive on undertakings reporting cartel activity, (12) thereby reducing detection and enforcement rates under both the criminal and civil cartel regimes. (13)

Following its enactment in 2002, the cartel offence was the subject of a significant amendment with the entry into force in April 2014 of the Enterprise and Regulatory Reform Act 2013 (ERRA). A key element of the cartel offence as originally enacted was a requirement to prove that the defendant had acted dishonestly. This was included not because the government of the day wanted to target dishonest conduct as such but rather to achieve a number of ancillary objectives, (14) for which the dishonesty requirement was subsequently found to be either unnecessary or ineffective. (15) More significantly, the dishonesty requirement also made the offence more difficult to prosecute, resulting in fewer prosecutions (see further below). The requirement to prove dishonesty was therefore removed for conduct on or after 1 April 2014 and replaced by a number of statutory exclusions and defences. (16) The explicit aim of the reform was to make the criminal cartel offence more effective. I will return to this when I come on to the implications of the galvanised steel tanks case.

The statutory design of the criminal cartel offence, although of course a crucial element, is only one of a number of necessary ingredients for an effective criminal cartel regime. As well as the need for a well-designed offence that complements the wider public and private cartel enforcement regime, other equally important ingredients include:

• a specialist investigation and prosecution authority committed to cartel enforcement and with the necessary powers, policies and resources (including, in my view, an effective leniency policy that takes account of the criminal offence);

• a willingness on the part of juries to convict, based on societal attitudes that recognise the harm caused by cartel activity as deserving of criminal sanction; and

• a willingness on the part of judges to impose significant penalties, including, in particular, custodial sentences where this is appropriate.

Clearly there is an interplay between these conditions: for example, a well-designed cartel offence is one that juries will understand and be willing to convict on, and that judges will take seriously. I will comment further on each of these elements below; I have spoken at greater length on the first of these elsewhere. (17)

UK criminal cartel enforcement in practice

In the 12 years since the cartel offence entered into force, the number of prosecutions has been low. Of the 10 formal criminal cartel investigations launched during that period, only 3 have resulted in a prosecution; one is still ongoing. The others have all been discontinued without charges being brought, with the difficulty of proving dishonesty featuring prominently in a significant proportion of those decisions.

Of the 3 that have been prosecuted, the galvanised steel tanks case is the only one to have been tried before a jury. The results in the 2 previous cases were mixed:

• The first was the marine hose case, (18) in which 3 individuals pleaded guilty in 2008 to their involvement in a well-organised and highly sophisticated global cartel following internationally co-ordinated investigations. (19) All 3 individuals were 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, with the third defendant being ordered to pay costs.

• The second was the air passenger fuel surcharges case, (20) in which the OFT’s prosecution of 4 current and former British Airways directors collapsed in 2010 on procedural grounds following the discovery after the start of the trial of a large number of electronic documents from the account of a key witness. The case was subsequently the subject of an OFT board report, which drew a number of lessons from the case and made recommendations for future cases. (21)

This brings us to the galvanised steel tanks case, which concluded in September this year after 3 individuals were charged in 2014 with dishonestly agreeing to fix prices, share out customers and rig bids for the supply in the UK of galvanised steel tanks for water storage. The charges were brought after a criminal investigation which was launched in November 2012 by the OFT, with co-ordinated arrests and searches. At the same time, the OFT launched a related civil investigation into whether businesses had infringed the competition prohibitions under the CA98 or the equivalent provisions under EU law; (22) that civil investigation is ongoing and, as I have mentioned, no assumption should be made at this stage as to whether there has been an infringement by the undertakings.

The investigations followed an application for immunity by one of the suppliers under the OFT’s leniency policy, which has since been adopted by the CMA. (23) Under the policy, the first undertaking to come forward and admit its involvement in a cartel can avoid a fine on the business and can also secure immunity from prosecution for its employees and directors who co-operate with the CMA’s investigation. Of the 3 individuals who were prosecuted for the criminal offence, one of the defendants, Nigel Snee, pleaded guilty to the offence and was sentenced in September this year to 6 months’ imprisonment, suspended for 12 months, and ordered to do 120 hours’ community service within 12 months. (24) The remaining 2 defendants pleaded not guilty and were acquitted by a jury following a 3 week trial in June. (25)

Implications of the galvanised steel tanks case

So what are the implications of the galvanised steel tanks case for UK criminal cartel enforcement? Generalising from a single case – particularly when it has only recently been concluded – is invariably fraught with difficulty. Nevertheless, here are some immediate thoughts on what the case would appear to mean for the UK criminal cartel regime. These may be grouped around 3 themes:

• the requirement to prove dishonesty for pre-April 2014 conduct;

• the CMA’s capability as a criminal enforcement authority; and

• the judge’s sentencing remarks in relation to Mr Snee.

The dishonesty requirement

Starting with dishonesty, the only point in issue at the trial of Mr Snee’s co-defendants was whether in agreeing to the cartel arrangements they had acted ‘dishonestly’. No other element of the offence was contested at the trial.

Unlike in the US, there is no scope in the UK for enquiring into a jury’s reasoning, which must therefore remain unknown. Nevertheless, the fact that the jury was not persuaded that the 2 defendants had acted dishonestly in this case serves to underline the difficulties with proving dishonesty in cartel cases. Moreover, the various factors that were raised by the defendants during the trial – such as that their motivation was to preserve jobs and that they did not benefit personally from their conduct – are precisely the kind which (as the OFT argued in its response to the government’s consultation on the proposed reform of the offence (26)) may have some bearing on whether an individual was acting dishonestly but have no relevance to the wrongdoing that the cartel offence is designed to address, namely the serious harm that cartels do to competition and markets, and consequently to consumers, businesses and the wider economy. In fact, the case provides the evidence in support of the decision to remove the requirement to prove dishonesty which those opposing the reform argued was missing. (27) Indeed, if anything the experience of the galvanised steel tanks case would tend to suggest that the challenge of establishing dishonesty and bringing a successful prosecution for pre-April 2014 cartels may be greater than even the CMA or OFT had anticipated.

Capability of the CMA

Turning now to what the galvanised steel tanks criminal case tells us about the CMA’s capability as a criminal enforcement authority, as I have argued elsewhere, (28) cartel cases are inherently complex and demanding. If that is true of civil cartel enforcement, then it is even more so where criminal enforcement is concerned.

The scale of the challenge is captured, to some extent at least, by the following statistics from the galvanised steel tanks case, which involved:

• dawn raids involving 70 investigators deployed across 5 sites throughout the UK, obtaining and executing the first criminal cartel warrants in Scotland, the arrest of 4 individuals and coordination with 6 police forces;

• 70 witness statements served in evidence and 160 people contacted during the investigation;

• over 38,000 digital items reviewed for disclosure; and

• over 49,000 pages of material served, the schedules and indices alone running to more than 12,500 pages.

The CMA faced various ‘abuse of process’ arguments raised by the defence during the course of the litigation. All of these criticisms of the CMA were rejected by the judge ahead of the trial. The judge also refused the defence’s application for further disclosure, rejecting defence arguments that the CMA had failed to satisfy its disclosure obligations and defence criticism of the CMA’s management of digital material and its disclosure strategies. In dismissing those arguments, the judge commented on the “colossal scale” of the task and the “very thorough and comprehensive review” by the CMA disclosure team.

This is particularly significant as it demonstrates the progress made by the CMA and its predecessor in enhancing its criminal investigation and prosecution capability following the collapse on procedural grounds of the air passenger fuel surcharge prosecution in 2010. Moreover, that this is not an isolated incident is illustrated by the CMA’s prosecution under the Consumer Protection from Unfair Trading Regulations 2008 of a £20 million pyramid promotion scheme, which concluded last year and resulted in the conviction of 9 individuals after a major investigation, in which almost 300 witness statements were taken and over 5,000 items of material were seized and examined, and lengthy proceedings involving 2 long and hard-fought trials. (29)

Sentencing

Given the amendment to the offence, perhaps of greater general significance than the acquittals in this case is the sentence imposed on Mr Snee and the sentencing remarks of the trial judge, in what he described as “an unusual sentencing case”. Referring to the economic damage done by cartels, His Honour Judge Goymer made clear both the seriousness of the conduct – even allowing for the fact that the “amounts involved in [the galvanised steel tanks] industry were relatively modest by the standards of most industries” (30) – and that those convicted of the cartel offence can expect a prison sentence:

In my judgment, the economic damage done by cartels is such that those who involve themselves in them must expect prison sentences to mark the seriousness of these offences and to act as a deterrent to others. (31)

At the same time, citing Blackburn, (32) the judge also took full account of the “very substantial degree of [Mr Snee’s] co-operation” (33) – his early guilty plea and the extent of his voluntary co-operation as a witness for the prosecution, as well as his personal mitigation – to grant a discount at the ‘higher end’ (34) of the normal range of between two-thirds and three-quarters suggested by the cases, thus reducing the prison sentence by 75% from 2 years to 6 months. Citing the observations made by the former Lord Chief Justice, Lord Judge LJ, in Dougall, (35) His Honour Judge Goymer also suspended Mr Snee’s prison sentence for 12 months.

While the sentence imposed in each case will always be a matter for the trial judge, the sentence in this instance sends an important signal for future cartel cases that those who co-operate early and plead guilty can hope to receive a lenient sentence, whereas those who are convicted having pleaded not guilty can expect a custodial sentence. Indeed, in suspending Mr Snee’s prison sentence, His Honour Judge Goymer was at pains to make clear that in doing so he was not suggesting that anybody who commits a cartel offence should expect to escape going to prison. For those who have committed the offence, this should act as a powerful incentive to plead guilty and co-operate, particularly where the cartel conduct is on or after 1 April 2014 and the defence that they were not acting dishonestly will no longer be available.

Wider implications

Drawing any wider conclusions from the outcome in this one case about future cases, even in respect of pre-April 2014 cartel conduct requiring proof of dishonesty, is bound to be largely speculative and therefore prone to error.

Is the old offence dead?

For example, some have claimed that ‘the old offence is dead’. I don’t think we can or should say that. It has never been the CMA’s position (or that of the OFT) that the requirement to prove dishonesty made the offence impossible to prosecute, only that it made it unnecessarily difficult. Each case is of course dependent on its own facts and circumstances and it does not follow from the acquittals in the galvanised steel tanks case that the CMA would not be able to prove dishonesty in another case. Indeed, qualitative research to be published this coming Wednesday commissioned by the CMA with small and medium-sized enterprises (SMEs) suggests that, while SMEs often have misconceptions about what competition law covers, or know little if anything about it, most of them have a shared ethical understanding that some practices – including, in particular, price fixing – are unfair or wrong. (36)

Moreover, when applying the CMA’s prosecution guidance (37) and the Code for Crown Prosecutors, (38) each case needs to be considered on its merits. In doing so, the CMA will of course be aware of the verdicts in the galvanised steel tanks case and the CMA in fact concluded 2 cases in September of this year where it was not satisfied that the Code test was met. (39) That is not the same as saying that the CMA will not bring other prosecutions in respect of pre-April 2014 cartel conduct, however.

Leniency and assisting offenders

Another aspect of the galvanised steel tanks case was the fact that the CMA’s case relied, in part at least, on the evidence of immunised employees of the immunity applicant and also on the evidence of an assisting offender, who had pleaded guilty. (40)

It is commonly said that juries in criminal cases are prone to distrust the motives (and therefore the evidence) of immunised witnesses, and to a lesser extent assisting offenders. In the case of immunised witnesses there may also be a feeling that it is simply unfair that they have escaped prosecution by blowing the whistle and assisting with the prosecution of others who were no more culpable in the cartel conduct than they were. In the case of an assisting offender who has not evaded prosecution but has pleaded guilty and has still to be sentenced, there may be a suspicion that they are simply ‘singing for their supper’ to secure a more lenient sentence.

To what extent (if at all) any of these considerations were a factor in the jury’s verdicts in the galvanised steel tanks case, we will never know; so perhaps even greater caution is called for before seeking to draw any conclusions from this aspect of the case. Suffice it to say, that in any criminal case involving immunity or in which a defendant has offered to co-operate and give evidence, these issues will need to be given careful consideration when weighing up the prosecution strategy, including which witnesses to call and therefore the extent to which the prosecuting authority chooses to rely on immunised witnesses or the evidence of a co-defendant.

It is also with these sorts of considerations in mind that the CMA’s leniency policy includes detailed guidance on the approach which the CMA expects applicants and their lawyers to take in respect of any internal investigation they may conduct, including as it relates to such issues as the risks of witness contamination. (41) Indeed, failure to comply with the CMA’s guidance on this issue is liable to put an applicant’s immunity at risk.

Does it follow that the CMA cannot (or should not) rely on immunised witnesses or assisting offenders in future cases? No, particularly as we can’t know whether (and if so to what extent) these were even considerations in the jury’s thinking in this case; and even if they were, that is not to say that the outcome would be the same in another case with a different set of circumstances, a differently constituted jury and a different set of issues to determine, which for cartel conduct on or after 1 April 2014 would not include whether the defendants had acted dishonestly. Indeed, immunised witnesses or assisting offenders will often be very strong witnesses, whose courage and willingness to do the right thing by accepting responsibility for their conduct and assisting the authority may lend credibility to their evidence. Moreover, other jurisdictions with a criminal cartel offence (including trial by jury) and an immunity programme – most notably the US – rely successfully on immunised witnesses and assisting offenders. Indeed, without the CMA’s leniency policy, many cartels would not be uncovered at all.

That said, the CMA recognises that relying exclusively on leniency as a means of cartel detection is ultimately unsustainable. The incentive for undertakings, or indeed individuals, to self-report and apply for immunity will only be maintained if they perceive a significant risk of detection by the authorities if they fail to do so. Moreover, reliance on leniency carries with it certain limitations. For example, leniency relies on undertakings or individuals being proactive and choosing to come forward. These tend to be larger businesses with access to expert competition law advice, albeit that competition authorities can address this to some extent through advocacy. The CMA is thus increasingly proactive in promoting competition law understanding, relevance and reporting alongside the existence of its leniency programme, including among SMEs. (42) Experience also suggests that leniency programmes may be more likely (although not exclusively) to catch ‘late stage’ or failing cartels.

For these reasons, developing the CMA’s cartels intelligence function is one of the key areas in which we have been investing as part of a broader programme to enhance the CMA’s intelligence, investigation and enforcement capacity. (43) This has included a number of senior appointments, including the recruitment of a Director of Intelligence (44) and a Director of Digital Forensics and Intelligence, (45) as well as investing in a more sophisticated digital and forensics capability. At the same time, the CMA is committed to using the full range of its investigatory powers, including covert investigation powers under the Regulation of Investigatory Powers Act 2000 (RIPA), under which the CMA can require the production of communications data, carry out surveillance (directed and intrusive) and use covert human intelligence sources. (46) The CMA also operates a dedicated cartels hotline and is one of the few competition authorities in the world which has adopted an informant rewards programme, offering rewards of up to £100,000 for information about cartel activity. Strong relationships with UK and international enforcement partners also provide further opportunities for accessing valuable sources of intelligence.

The CMA is thus taking an increasingly proactive approach to cartel detection; indeed, almost half of UK cartel investigations opened since 2010 have been intelligence-led (that is, have not originated with a leniency application). At the same time, however, the CMA’s leniency programme continues to play an extremely important role in the detection and investigation of cartels in the UK. Indeed, an increasingly sophisticated cartels intelligence function and an effective leniency programme complement each other: an increased risk of detection as a result of intelligence activities (combined with a credible threat not only of corporate fines but also of criminal sanctions for individuals) can be expected to strengthen incentives to apply for leniency – thus further increasing the level of enforcement and the resulting deterrence effect from both the CMA’s intelligence work and its leniency programme.

Where does this leave the UK criminal cartel regime in its evolution?

Returning to the ingredients for a successful criminal cartel regime I identified earlier, how does the UK criminal cartel regime fare against those elements?

A well-designed offence that complements the wider public and private cartel enforcement regime

I have already outlined the way in which the UK criminal cartel offence has been designed to provide stiff penalties – including custodial sentences – for individuals who participate in hard-core cartel activity in a way that complements the significant fines that may be imposed on businesses under the pre-existing UK and EU civil regime. Moreover, building on the experience of other jurisdictions, most notably the US, the government hardwired into the legislation provision for the CMA to grant immunity from prosecution for the cartel offence, thus allowing the CMA to adopt a criminal immunity policy that complements and reinforces the leniency policy that exists for undertakings.

Even if the requirement to prove dishonesty represented something of a ‘false start’ for the UK criminal cartel regime, this has now been rectified for conduct on or after 1 April 2014. Moreover, the fact that the regime has required some adjustment in the light of experience is to be expected and is consistent with the experience of older jurisdictions with a criminal cartel regime. In the case of the US, as William Kovacic puts it, “US experience indicates that the development of a successful criminal antitrust programme is a cumulative process through which individual enforcement techniques are tested, implemented, and refined”. (47) Similarly, the OFT’s leniency policy went through 2 major revisions following the entry into force of the cartel offence, in each case informed by lessons learned from its own experience of applying the policy in practice, as well as the experience of other jurisdictions. (48)

This experience can be expected to continue as the regime evolves and new challenges are encountered; not least the new statutory exclusions and defences for cartel conduct on or after 1 April 2014 have yet to be tested. Subject to that ongoing learning process, which is both necessary and desirable, it seems to me that the UK criminal cartel regime does meet the first condition for an effective regime.

A specialist investigation and prosecution authority committed to cartel enforcement and with the necessary powers, policies and resources

Turning to the second ingredient, as I have argued elsewhere, (49) the UK cartel enforcement regime benefits from the inclusion of cartel enforcement (both criminal and civil) within an independent, specialist competition authority that combines – to the extent possible within the UK constitutional arrangement – investigatory and prosecution functions within the same agency (50) and includes a dedicated cartels group committed to cartel enforcement with strong specialist intelligence, investigation, prosecution and civil cartel enforcement expertise, together with the ability to draw on expertise from elsewhere within the wider competition agency. This is further supplemented by strong relationships and joint working arrangements with other national and international enforcement partners. Indeed, we have seen how the strength of the CMA’s investigation and prosecution capability is illustrated by the galvanised steel tanks case.

The CMA also has a broad set of investigatory powers, both overt powers under the EA02, (51) as well as the covert powers under RIPA that I referred to earlier, and is committed to making comprehensive use of the full range of those powers. I have also explained how the regime benefits from a strong leniency policy, as well as measures to encourage intelligence (including an informant rewards programme). The CMA also enjoys broad political, as well as wider public support for its mission, as reflected both in the legislative architecture of the regime and in the funding for the organisation. This includes additional funding to enable the CMA further to enhance its cartels intelligence, investigation and enforcement capacity. (52)

Subject to the same point I made earlier about continual improvement through learning and experience, it seems to me that the UK criminal cartel regime, therefore, also meets the second condition for an effective criminal cartel regime.

Willingness of juries to convict

Turning to the third ingredient for an effective criminal cartel regime – the willingness on the part of juries to convict, based on societal attitudes that recognise the harm caused by cartel activity as deserving of criminal sanction – the evidence on this (in either direction) is at best limited. The challenge is nevertheless clear. As William Kovacic puts it: “To judges and juries accustomed to the use of criminal law to condemn offences such as murder or robbery, it may not be self-evident that conduct in the economic sphere that does not pose an obvious, immediate danger to individuals also warrants criminal punishment”. (53)

The only criminal cartel case to have been tried before a jury in the UK is the galvanised steel tanks case and, as we know, the jury was not persuaded, in the particular circumstances of that case, that the 2 defendants before them had been acting dishonestly. Drawing any wider conclusions from the case about jury attitudes either towards cartel conduct more generally, or indeed about its dishonesty, is bound to be highly speculative and so of limited value. Each case will inevitably turn on its own facts and the verdict of one jury in one case on one particular set of facts does not mean that another jury in another case on another set of facts would necessarily reach the same verdict. Moreover, as shown by the conviction in August this year of Tom Hayes on 8 counts of conspiracy to defraud for the manipulation of LIBOR, UK juries are perfectly capable of returning (and are willing to return) guilty verdicts in financial crime cases, albeit that a number of the features of that case, most notably the substantial personal gain by the defendant, will not necessarily be present in cartel cases. (54)

Other sources of evidence – such as survey data – may be more informative of jury members’ attitudes towards cartel conduct, although here too a note of caution is called for. It is one thing for an individual member of the public to answer an abstract set of questions or respond to a set of hypothetical scenarios for the purposes of a survey. It is quite another thing to reach a verdict, as a member of a properly instructed jury, in respect of the conduct of specific individuals in a real live case in which the liberty of the defendants is at stake and after hearing detailed evidence and argument in the highly controlled environment of a courtroom over a number of days or even weeks.

That said, a well-constructed survey will give some indication as to the likely pre-existing attitudes of jury members, which are bound to influence – in one way or another – how they respond to the case as it unfolds before them. Indeed, such evidence may also be instructive to a prosecution (or indeed defence) team when considering how best to present their case to the jury.

I have already referred to the qualitative research of SMEs and competition law which the CMA will be publishing next week, suggesting that a majority of SMEs at least have a shared ethical understanding that practices such as price fixing are unfair or wrong. (55) Recent research carried out by the University of East Anglia (UEA) Centre for Competition Policy provides a further source of potential insight into UK public attitudes. (56) A number of interesting findings emerge from the survey. In particular:

• 65% of UK respondents expect the businesses they buy from to set their prices independently of each other, with 74% appreciating that competitors agreeing with each other the prices they will charge is bad for customers and will result in higher prices and 79% (when the term price fixing is introduced and explained) agreeing that price fixing is harmful to customers, that each business should set its own price independently and that such behaviour should be punished. Interestingly and perhaps surprisingly, all of these responses were somewhat higher for UK respondents than their US counterparts (with equivalent responses for US respondents of 54%, 64% and 66% respectively).

• On the other hand, levels of awareness as to the illegality of price fixing were lower (53% in the UK and 41% in the US). (57)

• Of those respondents who said they felt that price fixing should be punished, support for some form of sanction against individuals was high. At 75%, the strongest support among UK respondents who thought price fixing should be punished was for a ban from holding senior managerial positions in business. 61% of respondents supported a personal fine and only 27% of UK respondents who thought price fixing should be punished supported imprisonment. Perhaps not surprisingly, given the high level of US antitrust enforcement, support for imprisonment was higher among US respondents but at 36% was still less than half of those surveyed.

• Of those respondents who thought that price fixing should be punished, 76% of UK respondents said they thought it was serious enough to be treated as a crime (the same proportion as in the US).

• In terms of the comparison between price fixing and other crimes, most respondents (unsurprisingly) considered price fixing less serious than crimes which involved physical attacks against the person (80%) or that went to safety, such as misleading consumers about the safety of goods or driving under the influence of drink or drugs (between 60 and 80%). On the other hand, around 50% or more thought price fixing was about the same as fraud or insider dealing. The results for the US were similar to those for the UK. Around 50% of US respondents considered that price fixing was about the same as stealing another’s property, whereas in the UK this figure was around 40%, with around 50% considering that theft is more serious.

• Interestingly, particularly in light of the amendment of the UK cartel offence for conduct on or after 1 April 2014, 82% of UK respondents considered that secrecy makes price fixing more deserving of punishment because it shows the individuals knew they were engaged in wrongdoing (79% in the US).

As I have said, there are clear limits to the inferences that can be drawn even from a detailed survey of this kind about the willingness of juries to convict in live cases. Nevertheless, the survey does tend to suggest that, while there may be an instinctive reluctance to see cartel behaviour as meriting imprisonment, public support in the UK for criminalising and punishing cartel behaviour, including with the imposition of penalties of one kind or another on individuals, would appear to be strong and at least as strong as in the US. Moreover, even though (at 27%) support in the UK for the imprisonment of individuals would appear to be low, it is not significantly lower than in the US (at 36%), a jurisdiction with a longstanding and highly effective criminal cartel regime. Moreover, public attitudes in the UK would appear to be hardening. When the UEA conducted the same survey in 2007 only 11% of UK respondents felt that individuals involved in price fixing should face imprisonment. (58)

Ultimately, what matters for effective cartel enforcement of course is not the attitude of juries when considering cartel behaviour in the abstract but how those attitudes inform their approach to the evidence when reaching a verdict in a live case. Indeed, formally the role of a juror is not to reflect and decide on societal attitudes but to give effect to the societal attitudes parliament has reflected by criminalising cartel conduct in the first place and to return a verdict of guilty where the offence has been proven. The reality may not be quite so straightforward, however. Moreover, any offence which includes dishonesty as an element of the offence will require the jury – applying the legal test established by the Court of Appeal in Ghosh (59) – to assess in the case of each defendant whether their conduct was dishonest according to the ordinary standards of reasonable and honest people and, if so, whether the defendant must have realised that what they were doing was dishonest by those standards. This explicitly invites the jury to reflect on their attitude towards the conduct.

Much will no doubt depend on how the case is presented and argued before the jury. Adam Smith described cartel behaviour as “a conspiracy against the public”. (60) Another way of looking at it is as a form of ‘theft’ on the basis that buyers have a legal right to purchase at a competitive price and that sellers who fix prices take what belongs to others, at the same time raising prices beyond the reach of those who can’t afford the inflated price. (61) There is undoubtedly force in that argument as reflected in comments made by Sir John Vickers, the Chairman of the OFT at the time the cartel offence was enacted: “Since hard-core cartels are like theft, criminalisation makes the punishment fit what is indeed a crime”. (62) Other ways of viewing cartel activity is as a form of deception or cheating on customers, which denies buyers the ability to take countermeasures that they might otherwise take if they knew that their suppliers were co-operating rather than competing. Indeed, this was the rationale behind the statutory exclusions and defences that have replaced the requirement to prove dishonesty for cartel conduct on or after 1 April 2014. (63) Moreover, as we have just seen, the survey evidence from UEA suggests that this approach may be expected to resonate with a significant proportion of UK citizens. (64)

In addition to the presentation of the case in the courtroom, the CMA also has a role to play outside it in raising awareness of the damage caused by cartel behaviour, including by way of education and engagement, such as through the publication of research, guidance, interviews and speeches.

On this third ingredient of an effective criminal cartel regime, perhaps the best we can say at this stage of the regime is that the evidence is unclear. Both the UEA survey data and the evidence from the CMA qualitative research of SMEs and competition law I referred to earlier, however, would suggest a significant degree of alignment between public attitudes in the UK towards cartels and those of the UK government and parliament in making it a criminal offence.

Willingness of judges to impose significant penalties

Turning to the willingness of judges to impose significant penalties, Terry Calvani, when he was a member of the Irish Competition Authority, commented that the success of the Irish criminal regime, “depends in large measure on the willingness of the judiciary to impose custodial sentences on individuals found to be in violation of its cartel prohibitions”. (65) This is clearly linked to public attitudes more generally. As John Fingleton commented when he was OFT Chief Executive that “absent broad political and popular consensus that cartel activity is theft, judges may simply impose fines on guilty executives or, if a custodial sentence, suspend it or apply probation” (66) thereby undermining the deterrent effect of the offence.

Those concerns, in the case of the UK, have since been allayed both, as I have explained, by the sentencing remarks of His Honour Judge Goymer in the galvanised steel tanks case, and by the sentences imposed in the marine hose case before that. In that case the trial judge, His Honour Judge Rivlin QC, imposed prison sentences of between 2 and a half and 3 years, notwithstanding that all 3 defendants had pleaded guilty at the first opportunity. (67) These were subsequently reduced to between 20 months and 2 and a half years by the Court of Appeal. (68) Admittedly, that case was highly unusual owing to the fact that all 3 defendants had entered into plea agreements in the US under which the US prison sentences accepted by the defendants would be reduced by the amount of any jail sentence imposed in the UK. All 3 defendants therefore accepted, both in the Crown Court and before the Court of Appeal, that a custodial sentence was appropriate. That said, it was not an assessment with which the sentencing judge, His Honour Judge Rivlin QC, demurred; indeed, the sentences imposed by the Crown Court exceeded those provided for in the US plea agreements. Equally, although the Court of Appeal expressed reservations over the fact that the submissions made on behalf of the defendants were constrained as a result of the US plea agreements (69) and indicated that they may have been persuaded to reduce the sentences further had they been invited to do so, there is no suggestion in their judgment that the Court of Appeal had any reservations as to whether a custodial sentence was appropriate.

As regards the fourth ingredient for an effective criminal cartel regime, therefore, this too would appear to be met.

Is criminal cartel enforcement worth the investment?

As will be clear from my earlier comments, the scale of the task and the investment required to create an effective criminal cartel regime are substantial. As Terry Calvani has pointed out, criminal conviction requires a higher standard of proof than civil enforcement (proof beyond reasonable doubt rather than on a balance of probabilities), higher evidentiary standards and additional procedural safeguards. Given that the costs of prosecution are undoubtedly higher, the issue is whether the additional deterrence is worth the cost? (70)

In my view, the answer to that question is yes. That is not to say that corporate fines (which in the UK are imposed through the civil enforcement regime) do not have an important role to play, not least to capture a broader range of cartel activity, (71) as well as ensuring both that action is taken against the principal beneficiaries of the cartel and that businesses are incentivised to ensure that their staff comply with the competition rules. However, experience and research have shown that corporate fines alone are not sufficient to deter cartel activity. The main reason for this is that, as Wouter Wils and others have demonstrated, (72) corporate fines would need to be substantially higher to achieve deterrence than would be politically or socially acceptable.

The commercial rewards for engaging in cartel conduct can be significant. Indeed, academic research suggests that cartels can inflate prices in a market by 30% or more. (73) In order adequately to act as an effective deterrence, corporate fines would need to exceed not only this illegally gained profit from the cartel activity but to do so by a significant multiple to take account of the likelihood of detection. (74) Given their secret nature, estimating the probability of a cartel’s detection is fraught with difficulty. But even using a conservative estimate for the unlawful gain of 10%, a 5-year estimate for the cartel’s duration and assuming an optimistic detection rate of 33%, Wouter Wils calculated that monetary penalties would have to be in the range of 150% of annual turnover to achieve deterrence. Not only would fines at this level exceed the statutory limits both in the UK and, so far as I am aware, every other jurisdiction with a corporate fining regime for competition infringements, they would also in many cases result in liquidation, with significant costs to third parties, such as employees and suppliers, as well as resulting in a reduction (absent a new entrant) in the number of competitors in the market place. As Terry Calvani observes, “It is very doubtful whether any parliament would have the stomach for what is the equivalent of corporate capital punishment for price-fixers”. (75) Moreover, the effectiveness of corporate sanctions alone may be further limited by agency issues, where the short-term interests of a company’s executives differ from the longer-term interests of its shareholders. (76)

The threat of personal consequences for individuals – provided, of course, that it is credible – helps address both these issues and can also be expected to have a powerful destabilising effect on cartels, as well as the potential for increasing detection (particularly if accompanied by a well-designed immunity policy) and encouraging individuals to take personal responsibility for their conduct. As research commissioned by the OFT has shown, personal consequences for individuals (whether through criminal enforcement or an application for director disqualification) have a key role to play in motivating compliance. (77) The research, which was carried out by Deloitte in 2007, asked both lawyers and companies about the relative importance of 5 factors in deterring infringements. It is notable that both lawyers and companies surveyed placed criminal penalties (as well as director qualification) among the top 3 deterrents, while corporate fines were not in the top 3 deterrents for companies at all. These sorts of issues are also not unique to cartels or the CMA; ensuring that both individuals (as well as firms) are held to account for the way in which they conduct their business, thereby promoting compliance and deterring unlawful behaviour, is equally important in other areas, such as financial regulation and white-collar crime. (78)

Could the same effect be achieved more cost-effectively through individual fines, avoiding the need for imprisonment? This certainly has merit and is a feature of some jurisdictions. The main problem with this, however, is the difficulty of ensuring that the fine is actually borne by the individual and that he or she is not reimbursed by the business. As Terry Calvani points out, “Although laws can forbid companies from reimbursing fines paid by executives, in practice, such laws are very difficult to police” (79) Unlike fines, imprisonment has the benefit of being non-transferable: no one else can serve a jail sentence for you.

Alternatively, could the use of the UK director disqualification provisions (introduced at the same time as the criminal regime) provide a viable ‘third way’? (80) Although outside the scope of this speech, in principle, yes. Disqualification can be expected to have a significant impact on incentives to comply, resulting in damage to reputations and effects on career and earning potential; in addition, unlike fines a director who is disqualified cannot easily be compensated by their employer. Outside a criminal prosecution, this is still untested in the UK, however, and is obviously only applicable to company directors; which suggests that there would still be a role for criminal sanctions.

Conclusion

The journey to establishing a fully effective criminal cartel regime is long and challenging. As William Kovacic has observed “the establishment of an effective criminal enforcement programme for competition law is likely to be a slow, incremental growth”. (81) The US experience is instructive in this regard. It has been argued with some force that only since the 1990s – that is, a century after the Sherman Act came into effect – has there been effective public cartel enforcement in the US and that this was the product of policies that were implemented and subsequently refined in the preceding decades. (82) It would be wrong to assume that the experience in the UK will take as long, as we should be able to benefit – and have done already – from a degree of ‘last mover advantage’ as a result of being able to learn from the experience of others. (83)

Moreover, even in comparison with other ‘last movers’, the UK experience is not atypical. Ireland, for example, has had a criminal cartel regime since 1996 and has seen a number of successful prosecutions, although to date the prison sentences imposed have all been suspended. Australia’s criminal cartel offence came into force more recently in July 2009 but has yet to result in a prosecution. That is not to criticise either jurisdiction but rather to illustrate my point that, even with the undoubted benefit of a ‘last mover advantage’ it takes time to establish a criminal cartel regime that is fully effective.

In my submission, the galvanised steel tanks case should, therefore, be viewed as an important staging post on the UK’s journey towards a fully effective criminal cartel regime. The main building blocks are now in place and, notwithstanding a number of setbacks along the way, we have been able to learn from each of these and made significant progress as a result. Of course there will be further challenges (the new exclusion and defences in the amended offence still need to be tested) but, given the serious economic damage done by cartels and the important deterrent effect that individual sanctions can be expected to have, the journey is one which in my view (and that of the CMA) is worth making. It is for this reason that the CMA’s commitment to investigating and taking enforcement action against those who engage in cartel conduct remains undimmed and that our message to individuals and businesses alike regarding the importance of compliance is as relevant as ever.

Footnotes

1. I am grateful to my colleague Georgina Laverack for her assistance in preparing this speech and to a number of other CMA colleagues for their input, including Alex Chisholm, Lee Craddock, Wayil Eisa, Judith Frame, Roland Green, Michael Grenfell, Simon Jolley, William Kovacic, Max Malagoni and Deborah Wilkie.
2. References in this article to ‘civil’ cartel cases are to cases brought under the administrative regime for the enforcement of the UK and EU competition rules applying to undertakings.
3. Section 188(1) of the EA02.
4. An undertaking for these purposes is any entity engaged in economic activity, regardless of its legal status or how it is financed: see, for example, Case C-41/1990, Höfner and Elser v Macrotron (1991) ECR I-1979 at paragraph 21; see also Case T-6/89, Enichem v Commission (1991) ECR II-1623 at paragraph 235. While legal persons such as companies will often be acting as undertakings, the notion of an entity in this context can be broader than one legal person. A corporate group made up of a number of individual legal persons can constitute a single undertaking: see for example Case 170/83, Hydrotherm v Compact (1984) ECR 2999. Note also that a natural person engaged in economic activity would also be an undertaking. An example of this would be a sole trader selling goods on a market: see for example Case C-309/99 Wouters (2002) ECR I-1577. Companies belonging to the same corporate group will generally constitute a single undertaking.
5. The only prosecutions to date have been by the CMA or its predecessor, the OFT.
6. Cartel offence prosecution: CMA9.
7. A World Class Competition Regime, Department of Trade and Industry, CM5233, July 2001.
8. See above, at paragraphs 7.15 and 7.16.
9. See above, at paragraph 7.9; see also paragraphs 7.1 to 7.51 for further discussion on the introduction of the criminal offence.
10. In addition to the inherent jurisdiction of the criminal courts to impose a director disqualification order following a conviction for the cartel offence, the EA02 also made provision for the OFT (now the CMA) to bring director disqualification proceedings under the Company Director Disqualifications Act 1986 against the directors of companies in breach of the prohibitions in the CA98 (or their EU equivalent).
11. In order further to incentivise applicants to come forward, the policy also allows for the provision of confidential guidance and provides that the CMA will always err in favour of the applicant in close calls.
12. Without the upfront certainty of personal immunity from criminal prosecution, company directors and other employees involved in cartel activity would be highly unlikely to come forward simply to avoid a civil fine on the undertakings for which they work.
13. Although criminal immunity is only guaranteed for the officers and employees of the first applicant to come forward, an individual who does not qualify for immunity but wishes to plead guilty to the offence and co-operate may be able to enter into a common law assisting offender agreement. See note 40.
14. These were: to signal the seriousness of the offence, to exclude the need for detailed economic analysis and evidence, to distinguish the offence from ‘national competition law’ for the purposes of Regulation 1/2003, and to ensure that it did not apply to agreements that might have countervailing benefits, making them lawful under the civil competition regime.
15. As regards seriousness, other UK white-collar offences that do not include a dishonesty requirement, such as bribery and insider dealing, carry even higher maximum sentences than the cartel offence: 10 years for bribery and 7 years for insider dealing. On the exclusion of complex economic evidence, the dishonesty requirement has in practice had the opposite effect to that intended and has in fact facilitated the introduction of economic evidence: in pre-trial rulings in the air passenger fuel surcharges case the trial judge was persuaded that expert economic evidence was potentially relevant to the issue of dishonesty. In the same case, the Court of Appeal placed no reliance on dishonesty when rejecting the defendants’ argument that the cartel offence was ‘national competition law’ within the meaning of Regulation 1/2003 (IB v R [2009] EWCA Crim 2575). On the need to ensure that the offence did not apply to agreements that might have countervailing benefits, making them lawful under the civil competition regime, the government concluded that this could be achieved by the introduction of a number of exclusions and defences (see note 16 below).
16. Specifically, the ERRA created 2 new exclusions – the notification exclusion (section 188A(1)(a) EA02) and the publication exclusion (section 188A(1)(c) EA02) – as well as retaining the bid rigging notification exclusion (section 188A(1)(b) EA02). In addition, the ERRA also introduced a number of statutory defences. These apply where: the defendant can show that he or she did not intend to conceal the arrangements from customers; did not intend that the arrangements would be concealed from the CMA; or before entering the agreement, 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 (section 188B EA02).
17. The case for specialist enforcement authorities from the perspective of the UK Competition and Markets Authority, December 2014.
18. R v Whittle, Brammar and Allison; see Marine hose: criminal cartel investigation.
19. As well as the CMA’s predecessor, the OFT, which played a central role in the investigation, these involved the US Department of Justice (DoJ), the European Commission, the Japan Fair Trade Commission and others.
20. R v Burns and others. See: Air passenger fuel surcharge: criminal cartel investigation.
21. On 17 December 2010 the OFT published a report summarising the findings and recommendations of an OFT board-led review into the events leading up to the collapse of the criminal trial in R v Burns and others, together with the response of the OFT’s management; see Project Condor Board Review.
22. Supply of galvanised steel tanks for water storage: civil investigation.
23. Cartels: confess and apply for leniency.
24. Director sentenced to 6 months for criminal cartel.
25. CMA statement following completion of criminal cartel prosecution.
26. A Competition Regime for Growth: The OFT’s response to the Government’s consultation (OFT1335), June 2011.
27. At the time of the government’s consultation on this issue, the proposal was mostly not supported by businesses, members of the criminal law bar or law firms with competition practices on the grounds (among others) that the case for change had not been adequately made out and that neither of the 2 prosecutions up to that point (the marine hose and air passenger fuel surcharges cases) had shown that prosecuting dishonesty was difficult. See: Growth, Competition and the Competition Regime: Government Response to Consultation, Department for Business Innovation and Skills, March 2012.
28. See note 17.
29. Prosecution of a number of individuals involved in an alleged unlawful pyramid scheme.
30. R v Nigel Snee, sentencing hearing, 14 September 2015.
31. See above.
32. R v Blackburn [2007] EWCA Crim 2290.
33. R v Nigel Snee, sentencing hearing, 14 September 2015.
34. See above.
35. R v Dougall [2010] EWCA Crim 1048.
36. ‘SMEs & Competition Law’ Qualitative Research Report prepared by BDRC Continental for the CMA, 15 May 2015.
37. Cartel offence prosecution: CMA9.
38. The Code for Crown Prosecutors.
39. In each case, the CMA concluded that the dual test for bringing a prosecution – the reasonable prospect of a conviction and public interest – was no longer satisfied. See CMA Blog Criminal cartel enforcement after galvanised steel tanks, 29 September 2015.
40. Although the criminal cartel offence is currently excluded from the statutory assisting offenders regime under the Serious Organised Crime and Police Act 2005 (SOCPA), the CMA can enter into assisting offender agreements under common law; for example, by way of a ‘text’ arrangement (see R v P Blackburn [2007] EWCA Crim 2290).
41. Leniency and no-action applications in cartel cases: OFT1495, at paragraphs 3.8 ff and Annexe C.
42. In addition to publishing the results of the qualitative research by BDRC of SMEs and competition law next week (see note 36), the CMA will also be launching a suite of targeted materials that provide a simple explanation for businesses of the main areas of competition law, both so they can ensure they comply themselves and so they can identify others who may be breaking the law and report them. These will include 8 short animated films on different aspects of the law, a number of 1-page at-a-glance guides, a checklist, case studies and an interactive quiz.
43. This relies on additional government funding with the aim of delivering what UK government ministers have described as a ‘step change’ in terms of the scale and sophistication of the CMA’s competition enforcement activities, including in tackling cartels. See ‘HM Treasury Autumn Statement 2013’, at paragraph 1.212.
44. CMA announces two senior cartel appointments.
45. CMA appoints to new senior cartel role.
46. 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 covert human intelligence sources, in the interests of the economic well-being of the UK.
47. William E Kovacic, ‘Criminal Enforcement Norms in Competition Policy: Insights from US Experience’, in ‘Criminalising cartels: critical studies of an international regulatory movement’, eds Caron Beaton-Wells & Ariel Ezrachi, 2011.
48. The current guide to applications for leniency and no-action in cartel cases (OFT1495) has been in place since July 2013 when it replaced an earlier document (OFT803), following a consultation between October 2011 and January 2012. The previous guidance (OFT803) was first published as an ‘interim note’ in July 2005 following a leniency conference in June 2005, by way of supplement to and elaboration of the OFT’s original penalty (OFT423) and no-action guidance (OFT513). This interim note was subsequently revised and published as final guidance in December 2008, following a consultation that was launched in November 2006.
49. See note 17.
50. This is particularly helpful to the effectiveness of the leniency regime. In the case of Scotland, where prosecutions are brought by the COPFS, the CMA’s Memorandum of Understanding with the Crown Office includes provisions for the handling of leniency applications designed to provide applicants with as much upfront certainty as the applicable constitutional arrangements will allow. Under the Memorandum of Understanding, where the CMA has received an application for immunity from prosecution in respect of a cartel that falls to be prosecuted in Scotland, the CMA will report the circumstances and recommendations to the Lord Advocate, who will accord any recommendation for immunity serious weight in exercising his discretion in the grant of criminal immunity in Scotland. In determining whether to grant criminal immunity, the Lord Advocate will take cognisance of the CMA’s own rules on leniency. Where possible the Lord Advocate will also give an early indication at the commencement of a leniency application, and before the applicant’s identity has been revealed, whether criminal immunity is likely to be granted (subject to full ongoing co-operation and on the basis that there are no criminal convictions or associations to be disclosed). For further discussion, see: Cartels: raising the stakes by Lindsey Miller and Emma Lindsay, 14 July 2014.
51. The CMA’s overt investigation powers under the EA02 include the power to require the production of information or documents, the power to search both business and domestic premises under warrant and the power to require individuals to answer questions.
52. See note 43.
53. William E Kovacic, see note 47.
54. Mr Hayes’ conviction followed an investigation and prosecution by the UK’s Serious Fraud Office (SFO); see: First LIBOR defendant on trial found guilty.
55. See note 36.
56. Andreas Stephan, ‘Survey of Public Attitudes to Price Fixing in the UK, Germany, Italy and the USA’, CCP Working Paper 15-8, July 2015.
57. This is consistent with the findings of quantitative research commissioned by the CMA to measure UK businesses’ understanding of anti-competitive behaviours and awareness of the penalties for breaching competition law, which suggested that many UK businesses lack awareness of competition law. See: UK businesses’ understanding of competition law.
58. See note 56. A Stephan, ‘Survey of Public Attitudes to Price-Fixing and Cartel Enforcement in Britain’ [2008] 5(1) Competition Law Review, pp123–145.
59. R v Ghosh [1982] EWCA Crim 2.
60. ‘The Wealth of Nations’, Book IV Chapter VIII, p145, paragraph c27.
61. Terry Calvani, ‘Competition Penalties & Damages in a Cartel Context: Criminalisation & the Case for Custodial Sentences’, 28 June 2004.
62. Address by the OFT before the British Chamber of Commerce ‘Policy for Markets and Enterprise’, 31 March 2003.
63. See note 16.
64. Andreas Stefan, see note 56.
65. Terry Calvani, see note 61.
66. John Fingleton, Marie-Barbe Girard and Simon Williams, ‘The fight against cartels: is a ‘mixed’ approach to enforcement the answer?’ Chapter 2 of International Antitrust Law 7 Policy: Fordham Competition Law 2006.
67. Crown Court sentencing remarks transcript 11 June 2008.
68. R v Whittle, Brammar and Allison [2008] EWCA Crim 2560.
69. The Court of Appeal also expressed ‘doubts as to the propriety of a US prosecutor seeking to inhibit the way in which counsel represent their clients in a UK court, but having heard no argument on the subject express[ed] no concluded view’. This is to mischaracterise the nature of the US plea agreement, however. The US plea agreements were freely entered into by the defendants, each of whom had the benefit of independent US and UK legal advice, and applied only to the proceedings in the US. The agreements did not affect the rights of the defendants under UK law; nor were the defendants’ instructions to their respective counsel in the proceedings ‘imposed upon them by the terms of the plea agreements’, as stated in the Court of Appeal judgment.
70. Terry Calvani, see note 61.
71. For example, in the Loans to professional services firms case, individuals at RBS had disclosed future pricing information to their counterparts at Barclays. The OFT imposed a fine of £28.59 million on RBS for the unilateral disclosure of commercially sensitive information.
72. Wouter PJ Wils, ‘Does the Effective Enforcement of Articles 81 and 82 EC Require Not Only Fines on Undertakings But Also Individual Penalties, In Particular Imprisonment?’ presented at the 6th Competition Law and Policy Workshop at the European University Institute, Florence, 1-2 June 2001. Wils subsequently revised his assumptions in ‘Is Criminalization of EU Competition Law the Answer?’ 11th EUI Competition Law and Policy Workshop, June 2006. This did not affect his estimate that a fine of 150% of the annual turnover would be needed to achieve deterrence.
73. See An assessment of the UK discretionary penalties regimes. See also the Report on the nature and impact of hardcore cartels and sanctions against cartels under national competition laws, in which the OECD looked at a selection of cartel cases and estimated the median price increase to be between 15 and 20%, with a high of over 50%.
74. John Fingleton et al, see note 66.
75. Terry Calvani, see note 61.
76. John Fingleton et al, see note 66.
77. Deloitte report, ‘The deterrent effect of competition enforcement by the OFT’ (November 2007).
78. For example, the UK Financial Conduct Authority describes the job of enforcement as being “to help the FCA change behaviour by making it clear that there are real and meaningful consequences for those firms or individuals who don’t play by the rules”, including by pursuing “cases against individuals and holding members of senior management accountable for their actions”, as well as “criminal prosecutions, including for insider dealing and market manipulation”. See Enforcement Financial Conduct Authority.
79. Terry Calvani, see note 61.
80. John Fingleton et al, see note 66.
81. William E Kovacic, see note 47.
82. Scott D Hammond, ‘The Evolution of Criminal Antitrust Enforcement over the last two decades’, presented at the 24th Annual National Institute on White Collar Crime, 25 February 2010. See also: Vivek Ghosal and D Daniel Sokol, ‘The Evolution of US Cartel Enforcement’, The Journal of Law & Economics Vol 57, No S3, ‘The Contributions of Robert Bork to Antitrust Economics’, August 2014.
83. William E Kovacic, see note 47. The phrase originated from Khalid Mirza, former head of Pakistan’s competition authority.

Published 13 November 2015