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Repeal the cartel offence (s.180 Enterprise Act 2002)

Comment 13th July 2010

UK competition law provides for heavy fines for companies found to have formed cartels to fix prices, boycott competitors or share out markets (Competition Act 1998).  Individuals involved can be disqualified as directors – ruining any business career. 

In addition, however, the Labout Government decided to make it a criminal offence, punishable by up to 5 years in prison, for individuals to be engaged in cartel behaviour.  The offence is prosecuted by the Office of Fair Trading or Serious Fraud Office.

There is a strong case for that offence to be repealed.

 

 

Why does this matter?

1.  There are already strong sanctions against companies and individuals involved in cartels: see the civil remedies above.

2. The existence of the criminal offence complicates enforcement of the civil remedies.  Because of the procedural differences between criminal and civil enforcement, investigations are made more complex and uncertain: essentially two sets of rules have to be followed, and both criminal and civil lawyers have to be involved.  The criminal offence has to be proved before action is taken against the companies involved (slowing down civil enforcement).  And the infringement has to be rpoved twice, once in a civil and once in a criminal context.

3.  The offence probably discourages, and certainly complicates, whistleblowing by companies and cooperation by companies with investigations: all individuals involved in the activity have to be told to get their own advice.

4. In 7 years since the offence came into force, there has been only 1 successful prosecution (a guilty plea on the basis of evidence obtained in the US by the US anti-trust authorities). One prosecution spectacularly failed (the BA/Virgin case.  No other prosecutions are in the pipeline.

5.  The existence of the offence means that the OFT has to retain a substantial pool of criminal law expertise.  Repeal of the offence would enable those costs to be saved. The OFT could then contrate on the less complex, but so far under-used, process of asking the court to disqualify directors of companies found under the the OFT's civil powers to have infringed the law (in the course of which it can essentially rely on the civil findings, saving time and costs). 

6.  The most serious cartels are likely to be the subject of action by the European Commission.  That will inevitably complicate any criminal process in those serious cases, since the Commission is likely to want to proceed and in doing so is likely to make it difficult to bring a later criminal prosecution (risks of prejudice/use of evididence not obtained in accordance with criminal procedural rules). 

6.  Most of Europe operates without an equivalent offence. 

7.  The offence itself is very complex.  It takes two sections and two pages of text.  It also potentially covers a range of acceptable commercial behaviour, subject only to the requirement of "dishonesty" (a difficult matter to judge, since it depends on juries' perceptions of commercial conduct which they may or may not think acceptable).

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