On 18 October 2012 the Enterprise and Regulatory Reform Bill 2012 was passed to the House of Lords. It will then be read a second time, go before a Lords Committee and, provided the House of Commons agree to any further amendments, proceed to become law upon Royal Assent. The reforms contained in the Bill will introduce far-reaching changes to the UK competition regime. Amongst these reforms are amendments to the criminal cartel offence. The cartel offence is contained in section 188 of the Enterprise Act 2002 and applies to individuals who “dishonestly” enter into horizontal (i.e. relating to products or services at the same level of trade) agreements to fix prices, limit production or supply, share markets or rig bids.
The Bill proposes the removal of the requirement for a cartel offender to have acted dishonestly. When this amendment was first proposed it caused considerable alarm among practitioners and businesses alike, as it appeared to drastically lower the bar to criminal prosecution. The Government and the OFT wanted to increase its “hit rate” for bringing criminal prosecutions under its Enterprise Act powers. However, more recent amendments to the Bill have provided a new set of defences designed to address industry concerns. These defences are discussed below.
Under a new Section 188A, no offence is committed where the arrangements at issue have been notified or published in accordance with requirements to be specified by the Secretary of State for Business, Innovation and Skills. For this defence to be available, “relevant information” must be given to customers and/or the Competition And Markets Authority (“CMA”) (the body set to replace the OFT and Competition Commission), or suitably published. In respect of bid rigging, this replicates the provision already in place under section 188(6) for exemption where the contracting party knows about the bidding arrangements in advance. Section 188A also provides for a defence where an agreement is entered into in order to comply with a legal requirement under UK statutes or regulations or an EU Regulation.
There is an additional defence under a further new section 188B, where the accused can prove that at the time they entered into the arrangements in question they did not intend to conceal them from customers and/or from the CMA, or that they took “reasonable steps” to ensure that the “nature” of the arrangements would be disclosed to professional legal advisers for the purposes of obtaining advice on their legality prior to being put into practice.
These defences do not seem to add much clarity to the offence in the absence of the dishonesty element. The Government would argue that the defence of non-intention to conceal is a more targeted replacement for it, but since it operates as a defence and not an element of the offence for the prosecution to prove, it opens the door to increased prosecutions. The onus will fall on defendants to show that they did not intend to conceal the agreement in question and so to thereby cast reasonable doubt on the OFT’s case.
The provisions of the new offence seem more focused on whether an agreement was made in secret rather than on the seriousness of its anti-competitive intent and/or effects. This appears to distort the original public policy aim of criminalising hard-core cartel activities.
The revised criminal cartel regime also includes a provision for CMA guidance to be drawn up, for CMA consultation during cases (e.g. with the Serious Fraud Office), transitional provisions (so that agreements entered into after commencement of the new legislation but relating to arrangements made before commencement will be subject to the existing offence) and the power for the Competition Appeal Tribunal to issue search warrants to CMA officers. This power was previously reserved to the High Court (and sheriffs, in Scotland).