Directors beware: CMA disqualifies more directors due to unlawful cartel activity



On 15 June 2020, the Competition and Markets Authority (CMA) announced that two directors have been disqualified for six and a half years for the role they played in a price fixing cartel amongst local estate agents. These two disqualifications bring the number of directors disqualified following a CMA investigation to 18, with roughly half of these occurring in the last 12 months alone.

The disqualifications mean that the individuals cannot act as directors, or be involved in the management, of any company based in England, Scotland or Wales during this time.

The disqualifications follow a CMA cartel investigation, leading to an infringement decision in December 2019. In that decision, the CMA found that four Berkshire estate agents entered into unlawful anti-competitive agreements to fix the minimum level of commission charged on the sale of residential properties for almost seven years.

The CMA is also pursuing two further separate director disqualification proceedings – one in relation to another estate agency cartel, this time in the Burnham-on-Sea area, and another in relation to a cartel in precast concrete drainage products.

These cases highlight the CMA's increasingly aggressive approach to bringing actions against directors for breaches of competition law, in addition to the usual fines imposed on companies.

What are the risks for directors?

The CMA can apply to the court to seek the disqualification of any director for up to 15 years where their company has infringed UK or EU competition law. An infringement can include agreements, arrangements and concerted business practices which appreciably prevent, restrict or distort competition and which affect or may affect trade within the UK (or the EU).

Not knowing is no excuse. It is not necessary for the director concerned to have contributed to the breach or to have acted criminally themselves – where a director had reason to suspect the breach but failed to stop it or ought to have known about it, this may also be grounds for disqualification.

It is also a criminal offence to engage in cartel activity, which includes price fixing, sharing customers or markets, limiting production or supply, or bid rigging. Directors (and other employees within a business) can be fined or imprisoned for up to five years for competition law infringements.

Managing the risks

Being aware of the main rules of competition law is the essential first step.

Companies should start with an assessment of who within the business could put it at risk because they have regular contact with competitors, perhaps through trade bodies or because the business buys from or sells to competitors. Both directors and key individuals within the business who are at risk of infringing competition law need to understand the dos and don'ts when interacting with competitors. This can be achieved through a comprehensive training programme for relevant employees and the board. The board needs to appoint one of the directors to have specific responsibility for ensuring compliance. Compliance should be a regular item on board agendas, and one which is taken seriously and regularly re-assessed.

Internal processes should also be put in place to ensure that there are mechanisms for reporting and dealing with any infringements which may occur. If, for example, staff attend trade association meetings, they need to know what they can and must not do.

Implementing a robust competition law compliance programme is essential to protect the company, its employees and its directors.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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