“We're uncovering one cartel a month. We are now uncovering more serious ones. This activity is equivalent to theft. It has no redeeming features. Effective deterence is very important.” This came from the Office of Fair Trading's (OFT) Director of Competition Margaret Bloom in May.
Hard talk from the regulators makes good copy and UK plc cannot open its morning newspaper at the moment without reading yet another story on 'regulatory risk'. Barely a week goes by without one law firm launching a dawn raid hotline or another releasing a fully interactive DVD presentation on the Enterprise Bill, with Julia Roberts presenting. Alright, the Julia Roberts DVD is an exaggeration, but there has been a flurry of activity recently from corporate firms.
There is a certain amount of bandwagonism in the trend, but a survey released by the London School of Economics (LSE) this week suggests that UK plc could do with more help fighting the regulators, particularly as the issue of criminalisation comes more to the fore with the implementation of the Enterprise Bill next year.
However, anecdotal evidence from lawyers operating in the field suggests that rival firms on serious investigations often make elementary mistakes. Unless all the lawyers are telling tales out of school, it is a relatively common problem.
If the survey is to be believed, it is not just hard talk coming from the regulators – they are getting much tougher. The LSE concludes: “Regulators' political masters are encouraging them to be bold. Policy makers believe that a gentle approach to enforcement has not worked.” The OFT alone currently carries out an average of four raids per month, so UK plc fears of the competition bogeyman are justified.
So, the scenario for company boards is: it is half past eight on a Monday morning and the OFT, accompanied by uniformed police officers, comes knocking on your door. If you want to prepare for this eventuality with mock dawn raids and a host of plans to silence renegade tea ladies who might spill the beans to the investigators, who do you call for help?
Incredibly, the survey's top spot goes to the people who brought us Enron – the accountants. Surely this is an excellent opportunity for lawyers to steal what is essentially legal work away from a tainted profession. Third place goes to the usual corporate advisers, and this is where some law firms have come unstuck in the past.
The best operators in the market concede that you need expert criminal advice to help UK plc and that this will increasingly be the case with the criminalisation provisions in the Enterprise Bill. You also need an almost incestuous familiarity with the regulators. Only a handful of the FTSE's favourite corporate advisers can provide these skills.
The LSE report, like many such surveys, is useful and interesting, but also a shameless law firm marketing ploy. However, the law firm behind it does have a regulatory practice that is a bit of a hidden gem. The firm is DLA. Almost universally loathed in the City as housing a bunch of Northern upstarts, the firm has an excellent and long-established regulatory practice. Unlike a lot of other practices in the firm, it does not get shouted about enough.
DLA's practice is headed by Neil Gerrard, a former police officer. Gerrard is evangelical about defending UK plc from the regulators. He also has a problem with what he calls “meddling amateurs”, in which category he puts the majority of magic circle and City firms. It is easy to see how Gerrard could rub people up the wrong way, but he has picked up the pieces from following mistakes by a fair few law firms and seems to be genuinely concerned for UK plc.
But it's not just DLA that has seen other firms slip up. The following three stories come from three different law firms. The names of the clients and the firms involved have been left out.
Earlier this year there was an OFT price-fixing raid on two company subsidiaries in the same building. The companies had separate legal representation. One law firm had a former lawyer at the regulator and that firm was allowed to decide for itself which of the company's documents were legally privileged and just hand over the rest. The other firm antagonised the regulator so much that the OFT took away all the documents, read them and argued about privilege later.
In April, the Serious Fraud Office (SFO) raided six drug companies in what lawyers initially thought was a price-fixing cartel investigation. Subsequently, the companies were charged with conspiracy to defraud, which is a criminal offence. The companies are mainly represented by corporate law firms and some still have not appointed criminal counsel despite having little or no in-house criminal experience.
On a Customs & Excise investigation into a company over VAT, the company, PricewaterhouseCoopers, and the company's City law firm, were raided. In a panic the City firm mistakenly handed over legally privileged information.
These tales are bad enough, but once cartels are criminalised, a director's personal liberty will be on the line and there will be even more reason to be careful. It is clearly something firms are thinking about.
DLA provides complete service in-house already; others, including Freshfields Bruckhaus Deringer, have tied up with specialist white collar criminal lawyers. Whichever way you do it, there is also a lot to be said for getting the criminal lawyers involved from the outset. There is also a lot to be said for a legal team that can get to you within an hour, because the police are not going to wait around much longer than that before starting a search.
DLA are not doing anything new, they are importing a model from a country where cartels are taken seriously – the US. The firm has lots of experience, including practice on its own turf last year when the DLA Manchester office was raided by the SFO in an investigation into a client. The practice may lack the high-profile pan-European cartel experience of the magic circle, but in a dawn raid there is probably a lot be said for being protected by a bunch of tough Northern upstarts headed by an ex-copper.