Most businesses instinctively know that cartels are ‘not above board’. They mostly associate cartels with price-fixing amongst competitors but a cartel can include other less obvious arrangements where businesses effectively agree not to compete with each other. Many businesses are aware that, if uncovered by the competition authorities, cartel activity can be punished with heavy fines.
It is still perhaps not so widely realised that individuals involved in the operation of a cartel in the UK can be punished with a 5 year spell in prison and directors can be disqualified for up to 15 years. The UK Competition & Markets Authority (CMA) has had limited success to date with such criminal cartel cases – dogged by the requirement that the jury had to find that those accused had acted dishonestly. This requirement has been removed from the statute books and, steadily, we will see more successful criminal cases.
In March 2017 the CMA launched a public campaign in its fight against cartels. Entitled “We’re cracking down on cartels”, the CMA is using widespread ‘cartoon’ advertising (including via social media) to raise awareness of what constitutes cartel behaviour and to encourage people to call the ‘cartels hotline’ to report cartel activity they have witnessed. The CMA wants to stamp out cartel activity by encouraging employees to blow the whistle with inside information. Anonymity can be assured and the CMA reminds the public that it can offer financial incentives of up to £100,000 for valuable information leading to a fining decision or criminal prosecution. If you are unlucky (or foolish enough) to be involved, the CMA points out that the risk of fines and/or imprisonment can be reduced or eliminated altogether where a business or individual reports their involvement and co-operates fully with the CMA’s investigation.
If the renewed risk of unwelcome attention from the UK authorities is not enough to send you rushing for your compliance manual, the European Commission launched its new whistleblowing tool just days before the CMA. Up until now, most cartels with a European dimension have been detected through the Commission's leniency programme where businesses report their own involvement in a cartel (in a similar vein to the UK system). The new tool makes it easier for individuals (as opposed to businesses) to alert the Commission about cartels while maintaining anonymity through sophisticated encryption.
You might be less concerned about what the European Commission is doing with impending Brexit but you would likely be wrong. Any UK business selling goods or services into an EU Member State post Brexit still has to comply with EU competition law. Much UK competition law closely mirrors EU competition law and the UK approach is unlikely to diverge from Brussels’ for quite some time to come. But if anything, the UK competition authorities may well develop a wider arsenal to tackle anti-competitive agreements and practices.
So the likelihood of detection and prosecution of cartels is set to increase. What can you do? Of course the risk to any business or individual can be significantly reduced where competition law compliance is taken seriously. To be effective, a compliance programme needs to capture those who make business decisions and not just senior management. Depending on the size of the business and its activities, it should also be carried out fairly regularly to both cover new employees and refresh memories.
The CMA has launched its ad campaign in response to research which revealed that less than a quarter of businesses said they knew competition law well. Time to make sure you are in that 25%.
Posted on 09/05/2017 in Legal UpdatesBack to Knowledge