On 21 March 2016, the Competition and Markets Authority (CMA) announced major developments in two of its ongoing cartel investigations, providing a welcome boast to the authority's enforcement credentials.
First, the CMA announced fines of £2.6 million on four companies involved in a cartel for the supply of galvanised steel tanks for water storage. The fines have been set as part of a settlement under which the companies have admitted their involvement in the cartel in return for a reduction of 20%-30% in the size of their fines.
The four companies involved are: Franklin Hodge Industries Limited, Galglass Ltd, KW Supplies Ltd and CST Industries (UK) Ltd (CST). CST blew the whistle on the cartel and escaped a fine under the CMA's leniency arrangements.
The CMA found that the companies in question had agreed to share the market between them, fix prices and rig bids, between 2005 and 2012. They allocated customers between them and in effect agreed not to compete for each other's customers. If any of them was approached by a customer that had been allocated to one of the other companies, they would put in an artificially high price to make sure that they did not win the business. The companies met regularly over the seven year period to discuss the arrangements. They also discussed how they would each respond to particular bids.
The CMA will now go through the motions of finalising its infringement decision against the four companies. However, that might not be the end of the matter for the businesses, since third parties (in particular, customers) may well pursue claims against them for damages that they have suffered.
The second development relates to an ongoing CMA investigation into precast concrete drainage products. In that case, the CMA is conducting a criminal prosecution under the cartel offence. The CMA has announced that an individual, Barry Kenneth Cooper, has pleaded guilty to the offence. Whilst it remains to be seen what steps the CMA will take next, it is likely that it will now proceed with a civil investigation into the business that Mr Cooper works for, and any other businesses that were involved in the alleged cartel. Without prejudicing the outcome of that investigation, it may well lead to the imposition of fines (and the possibility of follow-on competition damages claims).
These developments - and particularly the guilty plea in the criminal prosecution - provide a welcome boost to the CMA in its efforts to tackle cartels in the UK. The CMA also brought criminal prosecutions in respect of the galvanised steel tanks cartel, but with mixed results. It prosecuted three individuals. The first pleaded guilty and was sentenced to six months' imprisonment (suspended for 12 months) and community service. However, the other two pleaded not guilty and were subsequently acquitted by a jury at trial.
The acquittal of the two defendants in the galvanised steel tanks cartel underlined a perceived weakness in the cartel offence as it stood at the time, namely a requirement that the prosecution prove that the accused had 'dishonestly' participated in a cartel. Following legislative changes, there is no longer a need for the prosecution to prove dishonesty in relation to conduct taking place since April 2014. Interestingly, however, the precast concrete drainage products case relates to conduct before 2014 and Mr Cooper has pleaded guilty to having acted dishonestly.
As well as reiterating the CMA's credentials as a competition law enforcement agent, these developments underline the risks associated with anti-competitive conduct. The onus is on businesses to stay safe by implementing competition compliance programmes to help them identify and manage risk in this regard.