Developments In The Investigation And Prosecution Of Cartel Offences
Two defendants recently entered pleas of not guilty to cartel charges brought against them under section 188 of the Enterprise Act 2002, in a case that is listed for trial on 1st June 2015. Clive Geoffrey Dean and Nicholas Simon Stringer are accused of dishonestly agreeing with others to divide customers, rig bids and fix prices in relation to the manufacture and supply of galvanised steel tanks between 2004 and 2012. Another defendant – Peter Nigel Snee – pleaded guilty to being involved in the same enterprise in early 2014. The case will be a crucial test for the still fledgling Competition and Markets Authority (CMA) – the body which, as of April 2014, took over the functions of the Office of Fair Trading.
Established under section 25 of the Enterprise and Regulatory Reform Act 2013, the CMA has declared that its ambition is to develop into a mainstream enforcement agency, akin to the Serious Fraud Office. Speaking to the Business Crime 2014 Conference in November, Sonya Branch, Executive Director of Enforcement at the CMA, stated:
‘The CMA has also been provided with additional Treasury funding to enable it to deliver a ‘step change’ in terms of the scale and sophistication of its cartel enforcement activities. This investment will enable the CMA to continue – and accelerate – its current evolution in becoming more effective in detecting and taking action against cartels, in developing a more intelligence-led approach and becoming a key partner in the UK enforcement landscape.’
Of crucial importance in bringing about this ‘step-change’ will be the proactive use by the CMA of its full range of detection and investigation capabilities. These include the use of ‘no action letters’: granting immunity to individuals subject to certain conditions, which commonly include a requirement to cooperate with an investigation and to give evidence against others involved in the cartel. The CMA has also adopted an informant rewards programme, offering rewards of up to £100,000 to encourage whistle-blowing. David Harper and Keith Foggon, recently appointed to the newly created roles of Director of Intelligence and Director of Digital Forensics and Intelligence respectively, will lead the way in developing an increasingly proactive and intelligence-led approach to cartel investigations.
Elsewhere in her speech, Miss Branch also highlighted that the context in which big-scale or, to adopt the CMA vernacular, ‘hard-core’ cartel crime takes place means that there will often be an overlap with other economic crimes, such as bribery, corruption and fraud. With greater cooperation between the CMA and other agencies such as the SFO, the National Crime Agency and the Financial Conduct Authority, as well as international partners, it may increasingly be the case that what start as fraud or corruption investigations lead ultimately to cartel prosecutions, and vice versa.
In addition to what seems to be a change in emphasis of the role of the CMA, recent legislative change also means that there is likely to be a greater volume of cartel prosecutions in the future. As originally enacted, section 188(1) of the 2002 Act defined the cartel offence in the following terms:
‘An individual is guilty of an offence if he dishonestly agrees with one or more other persons to make or implement, or to cause to be made or implemented, arrangements of the [relevant] kind relating to at least two undertakings (A and B).’
However, section 47 of the 2013 Act removed the requirement for dishonesty from this offence. This was done in response to the perception that the dishonesty requirement was what had led to there being far fewer cartel prosecutions than had been anticipated following the enactment of the 2002 legislation. It is hoped by the CMA that this change will lead to an increase in the number of successful prosecutions.
On the other hand, a number of new statutory exclusions and defences have been added in an attempt to ensure that the removal of the dishonesty requirement does not lead to convictions which are unfair or which are not in the public interest. These exclusions and defences are now to be found in sections 188A and 188B of the 2002 Act, as amended. Broadly speaking their rationale is to avoid convictions where the deleterious effects of cartel activity have been negated or were never intended. For example, in certain circumstances there will be no offence committed where it was intended that customers would be told about the relevant arrangements that had been agreed upon before they accepted the supply to them of the goods or services with which the arrangement was concerned (s. 188A(1)(a)).
Ultimately, however, it seems likely that the removal of the dishonesty requirement, together with the cultural change within the CMA will lead to an increase in the number of cartel prosecutions in the courts. Indeed, in her speech in November, Miss Branch made it clear that the goal of the CMA in terms of its enforcement mandate is to deliver a steady stream or robust, high-quality cases to the courts. In the future both those working in commerce and industry, and legal practitioners in white collar crime will need to be alive to the possibility that the authorities will pursue cartel investigations and prosecutions with greater vigour and effectiveness.