Let's talk antitrust – Just the deterrent? The CMA’s director disqualification powers and criminal cartel offence

Video | July 2019 | 5:59

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Let's talk antitrust – Just the deterrent? The CMA’s director disqualification powers and criminal cartel offence
Jason Logendra Thank you Richard, for coming today. We’re going to talk about competition disqualification orders and competition disqualification undertakings, something that’s been really building up in recent times. As you know, it’s a power that the CMA and the OFT had before, to order that directors of companies have to stand down and can’t act as directors for other companies for up to 15 years. But it’s something that’s been relatively little used until recently the CMA stated that they were going to ramp up their use of CDOs and CDUs, and then suddenly we’ve seen a spate of something like eight disqualification undertakings in the first half of 2019. It would be interesting to get your views on how effective you think competition disqualification orders and undertakings will be as a deterrence tool.
Richard Whish QA Well, I think it must be a deterrent. As you say, there have been a number of these undertakings in recent times – three particular cases – one estate agency, one concrete drainage products and one office fit-out firms. But if we take estate agency, ok, that’s directors of relatively small agencies in a part of west Somerset but I would imagine in that profession, I would think news would get around very quickly that there have been these disqualifications and, you know, estate agencies are often relatively small and it may well be that they are owned by two or three directors. People don’t want to be disqualified in those circumstances, so I think they can definitely have a deterrent effect.
Jason Logendra
And to go with this increased use of these powers we have seen revised guidance from the CMA in relation to CDOs, where they’ve changed a number of their procedures, so there’s now no automatic right to an oral hearing for directors, reduced access to file and also the CMA can bring investigations into directors a bit earlier, so before the appeal time limit has expired in relation to the underlying infringement. Do you think that it’s possible that these changes to this approach could harm directors’ rights of defence?
Richard Whish QA Well no, I don’t actually, because, of course, we must remind ourselves it’s not the CMA that has the power. The CMA has the power to take a director to court, but ultimately this process is one that is under the control of the court and it’ll be for the judge to decide whether the rights of the defence are being adequately protected and so on, but it’s a judicial function.
Jason Logendra
It is a judicial function. We have seen a large number of these cases being settled rather than going to court. In fact, at this point no case has actually gone to court, although there is one pending.
Richard Whish QA
Well, to me that’s the interesting case you see, because you’re right, everything so far has been undertakings in lieu of a disqualification order and I think, really, ultimately it would be good to have a case go to court and be contested because I want to see how the judge handles it, whether he/she has particular views on the procedure etc. Who knows – one day there might be a case that then gets appealed to the Court of Appeal. This is ultimately how we get to understand law and procedure.
Jason Logendra
And, also, the extent to which the CMA will rely on these powers. To date we’ve seen them impose undertakings of between two and seven and a half years on directors as the period that they can’t be directors or shadow directors for, but obviously the powers extend up to 15 years. I don’t know if there’s scope for the CMA to push a bit further in future, as they did with infringement fines.
Richard Whish QA
Well, it is interesting that there was this case, concrete drainage products, where the disqualifications were six and a half and seven and a half years, so that is a lot longer than anyone in the past. Yes, I mean, who knows – one day they might go for a longer period. I don’t think that’s the point though. I think the really interesting point is, in a post-Brexit world the CMA will be investigating bigger cartels, the kind of things that are investigated in Brussels at the moment, and I would imagine that they will be looking at bigger PLCs and Incs and GmbHs and SAs and whatever. I think the really interesting thing is going to be when a director of a major company is disqualified as opposed to the relatively small undertakings that have been the subject of investigations so far.
Jason Logendra
As we see the CMA relying on these powers more it brings the personal liability element to the forefront of people’s minds in a way that maybe the cartel offence hasn’t, given that it’s not been successfully used so far. Do you think that the CDOs in some way replace that cartel offence and make it redundant?
Richard Whish QA
It’s a very interesting one and, I mean, historically we all know that the OFT and CMA have had difficulty in running the criminal cases and there are lots of technical and other problems with that procedure. I must say, historically I’ve always wondered why the CMA/OFT didn’t use the CDO powers more and clearly they are embarked upon using them consistently now. Will the cartel offence wither away? No, it’ll be there on the statute book but I would imagine there will only be an appetite for bringing a criminal case where the evidence is very, very convincing. And, also, let’s not forget Lord Tyrie’s suggestion in his recent letter to the Secretary of State that maybe those cases would be better run by the SFO rather than the CMA.
Jason Logendra
Thank you very much for those insights, Richard. Let’s see how this develops.