You’re Disqualified! UK competition authority looks set to target directors.

This post was written by Richard Waite.

The UK’s main competition authority, the OFT, appears to be gearing itself up to make greater use of its powers to target individuals involved in anti-competitive practices in the UK.

Individuals have faced the threat of enforcement action in the UK since 2003, in the form of disqualification of directors and, in relation to cartel activity, fines and prison sentences of up to five years.  However, to date, such sanctions have only been imposed in one case – and that being the Marine Hose case where the individuals admitted their guilt as part of a plea bargain with U.S. prosecutors.

The OFT has now issued new guidance relating to its power to apply to the court for competition disqualification orders (CDOs) to be made against UK company directors.  A successful application will result in a director of a company involved in anti-competitive arrangements, including abuse of dominance, being banned from acting as a company director in the UK for up to 15 years.  One of the key changes to the OFT’s approach reflected in the new guidance is that it no longer distinguishes between the level of involvement of the director in the infringing activity.  So, the OFT may now be likely to apply for a CDO where a director ought to have known about an infringement, as well as where the director him/herself was directly involved in the infringing conduct.  In other changes, the guidance now envisages CDO applications where there has not yet been a prior OFT decision or where the undertaking has not been fined.  However, a proposal to leave open the possibility of CDO applications in some cases where a company had applied for leniency was dropped due to concerns that it would undermine the leniency system.

The difficulties encountered so far in bringing successful cartel offence prosecutions (see for example the recent collapse of the trial against three British Airways executives), may partially explain why the OFT seems to be turning its attention to director disqualification as potentially an easier way to target senior individuals.  The OFT has never used these powers before, however, by publishing new strengthened guidance, it looks to be sending a message that it is intending to be more active in this area.  New guidelines on their own will obviously have no effect unless they are put into practice, so it will be interesting to see how long it is before these powers are tested and how successful they prove.  The OFT may well be waiting for a straightforward case where a director has been directly involved in a serious infringement in order to ensure its first CDO application is a success.