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Directors reminded of the risks of personal liability after the first director is disqualified following a breach of competition law by his company

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

02-12-2016

Daniel Aston, director of Trod Ltd has been disqualified from acting as a company director for a period of 5 years, having been a director of Trod Ltd during the time in which it infringed competition law.

This outcome marks the first time the Competition and Markets Authority (CMA) have invoked their statutory powers to seek the disqualification of an individual director where their company has fallen foul of the competition regime. Daniel Aston, managing director of online poster retailer Trod was found by the CMA to have “personally contributed” to the conduct that resulted in a breach of the competition rules and was therefore considered unfit to be a company director.

Directors of companies found to have infringed competition law face the risk of disqualification for up to 15 years. The CMA can also accept a disqualification undertaking from a director instead of bringing proceedings and this normally results in a discount in the period of disqualification. In this case the CMA was prepared to accept such an undertaking resulting in an agreed reduced disqualification period of 5 years. During this time, Mr Aston will not be able to undertake a role as ‘a director of a company or act as a receiver of a company’s property; or in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of a company; or act as an insolvency practitioner’ without the leave of the Court.

This undertaking follows the CMA’s decision of 12 August 2016, which found that Trod and GB eye Limited (GB), competing sellers on Amazon Marketplace, had agreed to implement a mechanism intended to avoid price competition whereby automated re-pricing software monitored and adjusted their online prices, thereby ensuring neither undercut the other.

GB applied for immunity and so suffered no repercussions from the CMA as a result of the breach. Trod however was fined £163,371.

Michael Grenfell, executive director for enforcement at the CMA said:

“Breaking competition law can harm consumers, businesses and overall economic performance. In this case, people shopping online were entitled to believe retailers were competing on price, whereas, unknown to them, the companies had colluded not to undercut each other’s prices. The responsibility to ensure that companies don’t engage in illegal anti-competitive practices is an important one, and company directors should not shirk that responsibility. The business community should be clear that the CMA will continue to look at the conduct of directors of companies that have broken competition law, and, where appropriate, we are absolutely prepared to use this power again.”

Comment

As fines for competition law breaches go, £163,371 is a relatively insignificant amount. It is therefore surprising that the CMA, after many years, has singled out this case as the first in which to pursue an individual under its powers to seek a disqualification order. This demonstrates that the CMA is clearly prepared to go after directors where there is evidence of their direct involvement in the infringement, making them personally accountable for the harm caused, regardless of the size of the company. It could also suggest a refocus by the CMA away from criminal prosecutions towards a greater use of this tool as a means of making individuals pay for their conduct and we could therefore see more such director disqualifications in the future.

One thing is certain – directors must continue to ensure competition law compliance of their organisations, however small. The OFTs guidance from 2011, which still stands, states that it is ‘reasonable to expect all directors [including shadow directors] to understand that compliance with competition law is important and that infringing competition law could lead to serious legal consequences for the company and for them as individuals’. All directors should therefore take this as a serious wake-up call alerting them to the need to protect their own positions by ensuring the risks of competition law are effectively managed throughout their companies.