What will cartel crackdown mean?
23 August 1999
26 May 2014
14 March 2014
2 July 2014
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30 May 2014
22 May 2014
James Wheaton, partner, Clifford Chance
Roger Finbow, partner, Ashurst Morris Crisp
Michael Cutting, partner, Linklaters & Alliance
The Office of Fair Trading (OFT) is to introduce sanctions for anti-competitive behaviour in an attack on companies operating cartels.
Currently, the OFT's bark is worse than its bite. It can issue a court order against cartels, but if companies do not comply, there are no sanctions available.
Last week, the director general of fair trading John Bridgeman announced guidelines for enforcing the new Competition Act, due to come into force on 1 March 2000.
Under the rules, a company indulging in anti-competitive practices, such as price-fixing or abuse of market dominance, may be fined up to 10 per cent of its annual UK group turnover for each year of infringement for a maximum of three years.
Moreover, the OFT has indicated it will take a strict approach when enforcing the rules.
The UK is following the US and EU lead by including a whistle-blower clause to encourage companies to co-operate quickly. The first company to alert authorities about a cartel may end up paying nothing. A second firm alerting authorities about an unfair practice may be rewarded with up to 50 per cent reduction on its fine.
Under the rules, the fine can be increased by aggravating factors which include involvement of senior management, retaliating against other companies involved in the infringement, and instigating an infringement. Mitigating factors include co-operating with the investigation, unintentional infringement, submitting to the cartel under duress, and the existence of an effective compliance programme.
But how effective are the new rules likely to be? And are they likely to cause any problems for lawyers advising clients?
Clifford Chance competition law partner James Wheaton says: "The US authorities have been trying this for some time and think it is the best way. The reason for these rules is to catch the cartel and save public money by avoiding a lengthy investigative process."
However he points out that the rules are "hypothetical and may be imposed more leniently. People like myself, who act for the companies involved, may be less enthusiastic about the rules. It's important to keep in mind the rights of the defence and conduct a proper full and fair investigation," he says. "Suppose the whistle-blower makes allegations about another company and that company denies those allegations?"
Ashurst Morris Crisp company partner Roger Finbow disagrees: "The truth will out - I can't think anyone's interests would be served by the whistle-blower making allegations which it can't then substantiate."
According to Finbow, the new rules are likely to create extra work for lawyers.
Finbow says: "One would hope companies will be adopting quite strict compliance procedures that will prevent them entering into an infringement.
"The more a company takes and is seen to be taking compliance seriously, and can be seen to be adopting a compliance programme, the more likely the authorities are to be lenient with them. I will be advising client companies to adopt a compliance procedure."
Linklaters & Alliance EU competition partner Michael Cutting calls the new rules "a laudable effort by the Department of Trade and Industry to send appropriate messages to companies about compliance".
Cutting says companies in the US "have raced to get in first because the difference between first and second can be millions", and recites a recent US investigation where the first whistle-blower paid nothing and the second company informing the authorities paid $49m (£30.6m).
Cutting says that companies can only take advantage of the whistle-blower provision if they fully co-operate, providing all information and documents that are available to them.