Following settlement negotiations with the parties concerned the Competition and Markets Authority (CMA) published on 31st May 2019 a non-confidential version of its decision in which it found six office fit-out firms had infringed the Chapter I prohibition of the Competition Act 1998.
The decision disclosed that the parties concerned engaging in cover bidding in response to invitations to tender thereby colluding on the prices they would bid for particular contracts. Over 14 contracts with a variety of customers were affected by their anti-competitive behaviour which took place in the years 2006-2017. Fines were imposed upon five companies ranging between £4.1 million – £7,7 million. One company benefited from immunity from fines under the CMA’s leniency programme. They had been the first company to raise the existence of the anticompetitive arrangement and their participation in it.
The particular significance of this decision is that several company directors of the parties concerned were disqualified as sitting as directors as a result of being involved as directors of the companies guilty of the anti-competitive conduct under Company Director Disqualification Orders (“CDO”)and Company Director Disqualification Undertakings (“CDU”). These were introduced under the Enterprise Act 2002. CDOs allow the CMA to seek the disqualification of an individual from being a company director for a period of up to 15 years, if that individual was a director of a company which breached either Article 101 or 102 TFEU or Chapters I or II of the Competition Act 1998 and their conduct is closely associated with the breach of competition law such that it made them unfit to be involved in the management of a company.
More particularly a director will be deemed unfit to be concerned in the management of a company if director concerned:
The CMA can seek a CDO by applying to the Courts. Alternatively it may accept a CDU from a director. This has the same effect as a CDO and can be enforced in the Courts. To date the CMA has now disqualified nine directors in total. These were all accepted by way of CDUs offered by the individuals concerned. This case saw the most recent example of the CMA’s use of CDOs/ CDUs. The CMA began proceedings against three former directors of the companies found guilty of anti-competitive conduct in May 2019. The relevant directors agreed to give CDUs and were banned from acting as directors or being involved in the management of any UK company for periods ranging between two and five years.
With this increased use of CDO/CDUs, the CMA wants to highlight that company directors do have responsibilities to abide by competition law. The CMA argues they need to take responsibility in respect of competition law compliance by their companies. The CMA state that whilst company directors are not expected to be competition experts, they are expected to have a sufficient understanding of what constitutes the most serious types of anti-competitive behaviour which includes bid rigging which was the subject of the present case.
.The CMA also published a case study relating to this decision to emphasise how important it is for companies and their directors to avoid this type of behaviour. Agreeing with a competitor to submit a cover bid is illegal and a company should never agree to submit a cover bid, even if it does not want to win the tender or take on the work or just to keep onside with customers or project managers. This is a form of cartel type activity.The CMA goes on to stress that this type of activity can have serious consequences for the businesses and individuals involved even if it is isolated behaviour and relate to historical activity In this case some of the activity took place as far back as 2006. It also advocates companies putting in place compliance strategies under which directors to lead by example and promote a culture of compliance within their businesses.