Every company director should be aware that recent changes in the UK’s cartel enforcement regime greatly increase the possibility of cartels becoming public – the Competition and Markets Authority (“CMA”) is now willing to reward whistle-blowers up to £100,000.
As the consequences for engaging in a cartel are severe: fines, imprisonment, forfeiture of personal assets, and directors disqualification orders, it is essential that companies have suitable protections in place. Two initial steps are prudent:
- Awareness training. Competition awareness is very low, especially amongst SMEs (18% think price-fixing is legal; 27% are unsure; only 55% know that it is illegal – it carries a 5-year prison sentence!), and
- Incentivising employees to whistle-blow internally, so that information is brought to the company’s attention before the CMA’s.
The UK Whistle-Blowing Regime
On 20 March the UK competition law regulator, the CMA, gave added impetus to the little-known £100,000 whistle-blower reward program to encourage whistleblowers to expose cartels: agreements where companies agree to:
- set prices or output levels,
- share markets,
- share customers, or
- rig bids.
The CMA has launched an advertising campaign to promote the £100,000 whistle-blower reward program, with a specific interest in exposing criminal cartels – with individual criminal liability and sanctions including 5-year imprisonment and seizure of assets, as well as 15-year director disqualification orders.
The EU’s Whistle-Blowing Regime
On 16 March the EU’s competition law regulator, the EU Commission, announced a new whistle-blowing tool for individuals that wish to keep their identity confidential. This complements the existing method, where individuals are required to provide their identity.
Points to Note
- The competition authorities will ignore confidentiality clauses in employment contracts.
- A whistle-blowing policy will enable the company to investigate, and it can decide whether to inform the authorities of the cartel.
- Both the UK and the EU operate leniency programmes, where the first to inform and cooperate can receive complete immunity from fines.
- Whilst the company might escape liability for fines under the leniency programme, the individuals involved may still be prosecuted and/or, if a director, disqualified.
- Having a competition compliance policy can limit individual director liability and any disqualification order.
- A competition compliance policy is now a director’s duty. If there is no compliance policy, the directors would be in breach of their duties, and it might increase a fine or lengthen any disqualification order.
- Breaching a director’s duty can also be the subject of a shareholders’ action for damages.
- A compliance policy is also an employment law issue – if completion compliance is not a part of the employment contract it is arguable that employees might not be in breach of his contract.
- Most contracts contain an obligation to comply with all applicable legislation, but the employee could argue that he was told to follow company policies – “we’ve always done that here” scenarios.
- Embedding competition compliance will reduce the chance of an employee or company cartelising, and it will also help identify questionable behaviour from other companies.
- Competition can be used as a sword, as well as a shield!
- In the financial sector, FCA Handbook SUP 15 contains an obligation to self-report even possible infringements of competition law.
- FCA Handbook SUP 15 provides that the obligation is triggered where the regulated firm or individual “has or may have committed a significant infringement of any applicable competition law.”
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