UK criminal cartel prosecutions could soon increase in the UK as the competition regulator focuses upon securing prosecutions following a change in the law.
On 1st April 2014, the UK’s new competition law regulator, the Competition and Markets Authority (“CMA”), takes over the Office of Fair Trading’s competition watchdog role. In preparation for this, the CMA on 12 March 2014 published prosecutorial guidance (“the Guidance”) in respect of the controversial new amended cartel offence.
The cartel offence is contained in Section 188 of Enterprise Act 2002 and is committed when an individual dishonestly engages with others in horizontal price fixing, market sharing, coordinated output restrictions or bid rigging. In the past decade only two prosecutions have been brought and only one was successful, the latter being a guilty plea. The reason for the lack of prosecutions was attributed by the UK Government to the difficulty of showing the accused acted “dishonestly”.
Therefore as of 1st April 2014, the dishonesty requirement will be removed under the Enterprise and Regulatory Reform Act 2013 (“ERRA”). In addition to the removal of dishonesty, a number of new defences are introduced. It will be a defence if the arrangement has been made known in advance to customers or otherwise publicised. Intriguingly, there is also an extra defence of taking legal advice on the arrangements prior to implementing them. Nobody is really sure how this particular defence is going to work in practice as the words of the section do not require the accused to reveal whether the advice opined that the arrangements were legal or not. It only required advice to be taken.
The UK Government hopes that it will allow the CMA to bring more cartel prosecution cases to court and secure appropriate convictions.
However, many legal commentators and practitioners have been hostile to the removal of the dishonesty requirement. Its removal greatly increases the scope of the offence and could potentially catch a number of otherwise perfectly lawful arrangements such as underwriting agreements and other financial related agreements. There is a worry that if the wide application of the offence is confirmed, the illegality of those types of agreements will cause considerable complications for business. It could also chill inward business investment into the UK.
The terms of the new defences have certainly raised eyebrows in the UK legal community and many have questioned how they will work in practice. The presence of so many defences, some of uncertain application, is likely to heighten uncertainty. In practice they could create a substantial impediment to convictions in just the same way the Government alleged the presence of the dishonesty requirement had done. So is the Government going round in circles?
Given the potential wide application of the new offence and the resulting uncertainty it will create for the international business community, the publication of the Guidance was an opportunity to spell out in clear terms the scope of the new offence and the type of agreements that would be caught. It was also hoped that the guidelines would provide in-depth guidance as to how the exclusions and defences to the new offence would work.
Sadly this was an opportunity missed. The Guidance contains very little in terms of actual guidelines on the scope and breadth of the new offence or the defences as was promised during the legislative process. A lot of the Guidance merely repeats the wording of the relevant section. Nevertheless the Guidance is useful in that it sets out the CMA reasoning for mounting prosecutions in the public interest when they have satisfied the requisite evidential standard.
A full copy of the Guidelines can be found here.