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An Important Watershed in the CMA’s Prosecution of the Criminal Cartel Offence

  • United Kingdom
  • Competition, EU and Trade - Export controls and sanctions
  • Financial institutions
  • Health and life sciences
  • Technology, Media and Telecoms

18-06-2014

In a move that signals a significant development in the criminal enforcement of cartels in the UK, Mr Peter Nigel Snee, Managing Director of Franklin Hodge Industries Limited, pleaded guilty on 17 June 2014 to the criminal cartel offence under section 188 of the Enterprise Act 2002.  Mr Snee was charged with dishonestly agreeing with others to divide customers, fix prices and rig bids between 2004 and 2012 in respect of the supply in the UK of galvanised steel tanks for water storage. Mr Snee faces a potential custodial sentence of up to 5 years plus unlimited fines.

Mr Snee was originally charged in January 2014 following a criminal investigation by the Office of Fair Trading (“OFT”) (now the Competition and Markets Authority “CMA”).  The CMA is also conducting a related civil investigation into whether businesses have infringed the provisions of the Competition Act 1998. The progress of the civil investigation is largely contingent on the progress of the criminal case but is expected to be taken forward given this latest development in the criminal case.

This is the first prosecution to be brought by the CMA under the criminal offence in 4 years since the collapse of the British Airways/Virgin Atlantic case in 2010 and represents a major step forward in criminal enforcement. The previous, and only, successful case brought under the criminal offence by the OFT was the Marine Hoses case which saw three UK directors sentenced to custodial terms of between 20 and 30 months along with confiscation and director disqualification orders. However the OFT had a limited role in bringing those prosecutions and the convictions followed on the back of the US criminal case.  The galvanised steel tanks case represents the first independently, UK-run prosecution in which an individual has pleaded guilty to the offence. The guilty plea must indicate that the CMA has learnt its lessons in terms of dealing with evidence.

This case follows a lengthy and sustained pronouncement from the CMA, and formerly the OFT, that they are to pursue criminal charges more often and with more rigour than before. Indeed, the CMA’s Annual Plan 2014/15 (CMA 15) states that the CMA would “Ensure that [they] commit necessary resources to prosecute effectively the criminal cartel offence, concluding, or commencing proceedings in respect of, at least one criminal cartel case”. To make this easier, on 1 April 2014 the Enterprise and Regulatory Reform Act 2013 came into force and amended the provisions of the cartel offence by removing the requirement to prove dishonesty. The new offence will apply only to cartel activity that takes place after 1 April 2014. A string of successful prosecutions by the CMA following the Snee case, on the basis of the original Enterprise Act criminal cartel offence, might call into question whether the amendment to remove of the requirement for dishonesty was really necessary.

At present the directors of the three other companies involved in the related civil case have not been charged, but we may yet see that happen.  The CMA however has other criminal cases in the pipeline, and it is possible that this case could be the start of a new chapter in competition enforcement. Finally, the CMA seems to be delivering on its plan.

Boards should therefore take heed - this development sends a strong message that there is a heighted risk for directors to be pursued and punished for their involvement in cartel conduct. Businesses therefore need to review and increases their compliance efforts.

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