Individual Sanctions: The Criminal Cartel Offence and Competition Disqualification Orders

Question 1

What is the Criminal Cartel Offence (CCO)?

Answer 1

The agreement, wholly executed or otherwise, between individuals on behalf of at least two horizontal Undertakings to either:
* Rig bids;
* Fix prices;
* Restrict output; or
* Allocate markets.

Defences or exclusions notwithstanding.

P. 490; §188(1)-(2) – EA 2002.

More generally, see Pt. 6 – EA 2002, as amended by §47 – Enterprise and Regulatory Reform Act 2013 (ERRA 2013).

Question 2

Who may Prosecute the Criminal Cartel Offence?

Answer 2

• The CMA.
• The Serious Fraud Office (SFO).

P. 490.

Question 3

What are the Consequences of Committing the Criminal Cartel Offence?

Answer 3

• Criminal prosecution.
• Director disqualification.

P. 487.

Prosecution may concern such things as false accounting, obstruction of justice, conspiracy to defraud, etc.

Question 4

When are two Individuals deemed to have reached an Agreement?

Answer 4

When they, with the requisite intent, make or implement arrangements to execute one of the four restricted activities.

Hereafter, these will simply be termed ‘Arrangements’.

P. 491.

Notably, all arrangements must be recpirocal except for bid-rigging, in whose case either unilateral or predetermined bilateral participation may constitute an arrangement.

Question 5

What are Traits that Disqualify an Agreement from constituting a Criminal Cartel?

Answer 5

1. Verticality.
2. Nonreciprocity.
3. Unilateral restrictions.
4. Avoidance of the four restricted activities.

P. 493.

Verticality refers to the targeting of different levels of the supply chain.

Question 6

What are the Exclusions to the Criminal Cartel Offence?

Answer 6

Before implementation:
* Notification: Customers were, or would be, given relevant information regarding the Arrangements.
* Bid-Rigging Notification: The Auctioneer was or would be, given relevant information regarding the Arrangements.
* Publication: Relevant information regarding the Arrangements was published in a Gazette.

P. 494; §188A(1)(a)-(c) – EA 2002.

Whether the Exclusions apply depends on the parties’ conduct and intentions at the material time.

Question 7

Regarding the Exclusions, what constitutes Relevant Information?

Answer 7

• The Undertakings’ names.
• The Arrangements’ concerned products.
• The Arrangements’ nature, sufficient to show why they may trespass the CCO.

P. 494; §188A(2) – EA 2002.

Question 8

What are the Defences to the Criminal Cartel Offence?

Answer 8

• Non-Intention to Conceal from Customers: The individual did not intend to conceal the Arrangements’ nature from Customers.
• Non-Intention to Conceal from the CMA: The individual did not intend to conceal the Arrangements’ nature from the CMA.
• Acquisition of Legal Advice: The individual took reasonable steps to obtain advice from a professional legal advisor on the Arrangements’ nature and implementation.

P. 494; §188B(1)-(3) – EA 2002.

Question 9

When can the CMA Investigate an Individual for the Criminal Cartel Offence?

Answer 9

When it has reasonable grounds for suspecting that an offence has been committed.

P. 498; §192 – EA 2002.

Question 10

In a Criminal Cartel Investigation, what are the CMA’s Investigative Powers?

Answer 10

• Power to enter premises.
• Power to survey suspects.
• Power to demand information.

P. 501.

The first two require warrants.

Question 11

In a Criminal Cartel Investigation, what are the CMA’s Information Gathering Powers?

Answer 11

Upon giving written notice, it may require the:
* Answering of questions; or
* Production of data, documents, or other information relevant to the Investigation.

Naturally, privileged or confidential information is protected.

P. 498; §193 – EA 2002.

Question 12

What are the CMA’s Surveillance Powers?

Answer 12

• Directed Surveillance, e.g. spying on messages.
• Intrusive Surveillance, e.g. bugging.
• Covert Human Intelligence, e.g. informants.

P. 501.

Question 13

How does the CMA decide whether to Initiate Proceedings?

Answer 13

By using the Full Code Test, which is comprised of two stages, namely:
* The Evidential Stage: Does the CMA sufficient evidence to realistically entertain a conviction?
* The Public Interest Stage: Would a prosecution serve the public interest?

P. 504; CMA, Cartel Offence, Prosecution Guidance (CMA9), March 2014, at [3.2]-[4.26].

Question 14

Why is the Criminal Cartel Offence so difficult to Prosecute?

Answer 14

The CMA does not maintain the scale of specialist expertise necessary and normally possessed by agencies with such powers.

P. 512.

Question 15

On what grounds is a Competition Disqualification Order (CDO) made?

Answer 15

The Director’s company is:
* An Undertaking that has breached competition law (i.e. C1P / C2P); and that
* His conduct as it pertains thereto makes him unfit to manage a company.

Immunity from disqualification is possible through Leniency Agreements.

P. 513; §9A – Company Directors Disqualification Act (CDDA) 1986.

Directors can undertake to disqualify themselves before the CMA in what is known as a Competition Disqualification Undertaking (CDU). In exchange, the CMA offers a lower sentence than the court would.

Question 16

When will a Director’s Conduct be deemded to render him Unfit to manage?

Answer 16

If any of following are true.
* His conduct contributed to the breach.
* He was unaware of the Undertaking’s foul play, but should have been.
* His condct did not contibute to the breach, but he had reasonable grounds to suspect foul play and took no action.

P. 519; §9A – CDDA 1986.

Question 17

For the Purposes of a Competition Disqualification Order, what constitutes a Director?

Answer 17

Anyone who performs the functions of a Director, regardless of formal title or appointment.

P. 514; §22 – CDDA 1986.

Question 18

Could a Director of a Parent Company be Disqualified for a breach by a Subsidiary?

Answer 18

Perhaps, since both companies are part of the same Undertaking.

P. 519. §60A – CA 1998.

This has not yet been litigated, so the answer is unkown.