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Posted on:
14th June, 2019

The Competition and Markets Authority is ramping up how they use their disqualification powers

The Competition and Market Authority are strengthening their disqualification power. The lesson is that business leaders need to know what is happening in their business, be alert to competition law dangers and lead by example. Here, Jessica Radke, Director of Litigation at the CMA, outlines what that means for business directors.

The Competition and Markets Authority is ramping up how they use their disqualification powers

Recent announcements by the Competition and Markets Authority (CMA) have highlighted that directors who are found to have broken competition law can face serious personal risk – in addition to the fines and sanctions taken against the company, directors can be disqualified and banned from acting as a director for up to 15 years. If involved in a criminal cartel, they are also at risk of criminal prosecution.

In April, two directors were disqualified for a combined total of 14 years for their part in a business cartel, and soon after in early May another 3 disqualifications were announced - both of these announcements related to the construction sector.

In February, we announced that for the first time we were applying to the courts to disqualify 2 remaining directors in an estate agents price fixing cartel case, having already secured the disqualification of another 2. This was the first time we applied to the court for disqualification orders, reflecting our determination to pursue individuals where no undertakings are offered. One director has since agreed to the disqualification. Our case against the remaining director is on-going and it will be for the courts to determine the outcome.

As these announcements highlight, the risk of getting caught breaking the law through anti-competitive (including cartel) behaviour is particularly serious for directors. And there have been recent changes to how the CMA goes about securing disqualifications. We have streamlined the process, allowing us to be more efficient. And we now consider whether to pursue director disqualification in every case where competition law has been broken, which has led to more cases. These changes heighten the risk on senior leadership if they are found “unfit” as a result of their actions or failure to act.

Implications for directors

Company directors have a special responsibility to be well-informed about the goings on in their business.

It’s not just those who were actively involved in breaking the law that are at risk of disqualification. If you knew and covered up the wrongdoing, or turned a blind eye to risky business practices that skirt the law, you could also be culpable. Not being vigilant when you should have known and stopped illegal activity on your watch i.e. being ‘asleep at the wheel’ also puts you at risk of disqualification.

So, how can you protect yourself and your business?

We know that most people and businesses want to do the right thing, but don’t necessarily understand competition law - just 18% of those polled in research with SMEs said their business had senior level discussions about it, trailing far behind health & safety and employment law.

The CMA has a number of resources that help small business owners understand what competition law means for them, and how to comply, including a quick guide on how to avoid disqualification, a checklist on how to comply with competition law and multiple resources on the StopCartels campaign page.

If you do think you have seen – or been involved – in anything that breaks the law, the best thing is to be safe, not sorry, and report it to the CMA straight away. If in doubt always seek independent legal advice.

Although those that cooperate with the CMA’s investigation can benefit from a discretionary leniency discount, the first company to come forward can benefit from fuller leniency – current and former directors are guaranteed immunity from disqualification, provided they fully cooperate with the CMA’s investigation. But if someone else comes forward first, you – and your business – could face serious consequences. In the end, it’s not worth the risk.

For further info on how to identify and report a cartel and advice on what to do if you think your business may be at risk of breaking competition law visit gov.uk/stopcartels.

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