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CMA’s cartel prosecution fails once again – but CMA refuses to give up

  • United Kingdom
  • Competition, EU and Trade - Competition e-briefings
  • Industrials


1. On 24 June 2015, two directors were acquitted of criminal charges that they had dishonestly agreed to fix prices, divide customers and rig bids between 2004 and 2012 in the supply of galvanised steel tanks for water storage in the UK. The jury only took approximately two and half hours to deliberate before unanimously deciding to acquit the directors - despite the fact that a third individual had pleaded guilty to the same offence last year and is now waiting to be sentenced.

2. This is the first criminal prosecution the UK competition authority has taken to trial since the case against British Airways executives collapsed in the early stages of trial in 2010. The choice of case by the Competition and Markets Authority (“CMA”) surprised some in the UK’s competition law community given that the companies involved were relatively small and that the directors claimed that the actions they took were designed to avoid bankruptcy and redundancies, rather than to increase profits at the expense of consumers. The directors’ intentions were particularly relevant as the offence for which they were tried required that they participated in the conduct “dishonestly”.

3. The CMA issued a statement shortly after the decision accepting that the jury “were not persuaded that [the directors] acted dishonestly” but noting that the case was brought under the law as it applied to conduct before April 2014. Under the old law, the prosecution had to establish that the relevant persons involved were dishonest, whereas it is no longer necessary to establish dishonesty under the new criminal cartel offence (which applies to conduct after April 2014). It can be inferred from the CMA’s press statement that the CMA feels it wil be easier to being successful prosecutions in the future, now that the dishonesty requirement has been removed.

4. However, whilst it is true that the dishonesty requirement has been removed from the offence (meaning that now the accused only had to have participated in the conduct, rather than dishonestly participated), the new law also includes a number of important defences and exclusions which were not present in the old criminal cartel offence.

5. The new defences are that the participants had no intention to conceal the arrangements from customers or from the CMA, or that reasonable steps were taken to obtain legal advice about the arrangements before they were implemented. Further, situations where customers notified their customers or published details of the conduct are excluded from the offence.

6. Whilst these exclusions and defences will clearly help a number of individuals avoid criminal liability, there has been much debate about the extent to which they will help individuals working for small and medium sized enterprises (such as those caught up in the galvanised steel tanks investigation) who do not necessarily have access to specialist competition law advice and therefore may not be in a position to protect themselves from prosecution by utilising the exclusions and defences.

7. Furthermore, there is some question as to the appetite generally of the British public for the imposition of custodial sentences on individuals involved in cartel activity, particularly given that it is in any event possible to impose fines of up to 10% of global turnover on the relevant companies involved under the civil law regime.

8. The rationale for supplementing enforcement against companies involved in anti-competitive conduct is that penalties directly targeting individuals are supposedly more effective in deterring infringements than corporate sanctions. However, the extent to which that incentive is successful depends to a large extent on how real individuals perceive the risk of prosecution to be. Accordingly, one of the main issues with criminal enforcement to date has been the very low level of successful prosecutions.

9. There is also some debate about the effect that criminal liability for individuals has on the leniency regime. Under that regime, where a company approaches the CMA, either before or during an investigation, with evidence of anticompetitive conduct the company can receive immunity from, or reductions in, financial penalties. They may also be able to achieve immunity from criminal prosecution for their employees, but this will depend on when the company approaches the authority and if others have already made applications on the same facts. In that case, there is no guarantee of criminal immunity and the risk of prosecution may lead individuals to downplay their role or the conduct itself in the hope of avoiding prosecution, which can affect the company’s own investigation as well as any investigations conducted by the CMA itself.

10. The removal of “dishonesty” from the criminal cartel offence may exacerbate this problem. Further, if the cartel offence is now viewed as being easier to prosecute (as the CMA appears to be suggesting in its press statement regarding the galvanised steel tanks case) this may also cause the boards and directors of companies, concerned about the risk of a criminal investigation stemming from a leniency application, to be less likely to decide to proceed with a leniency application (unless they can be sure of criminal immunity for themselves and their employees).

11. Therefore, the acquittal of the two directors in the Galvanised Steel Tanks criminal case acts as a reminder of the complexities of the criminal regime and how this interacts with the leniency regime, as well as a warning that the CMA intends to pursue criminal cases under the new regime.