Businesses that breach competition law can face serious financial and reputational consequences. Certain serious breaches of competition law may also put individuals at risk of criminal prosecution. In addition, the CMA may apply to Court for a director disqualification order against directors of a companies engaged in anti-competitive behaviour.
For the first time, the CMA sought to use its power under the Company Directors Disqualification Act 1986. On 1st December 2016, Daniel Aston, managing director of the online poster supplier Trod Ltd, gave a disqualification undertaking to the CMA not to act as a director of any UK company for 5 years.
The disqualification follows the CMA’s decision of 12 August 2016 that Trod breached competition law by agreeing with GB eye Ltd (trading as ‘GB Posters’) one of its competing online sellers that they would not undercut each other’s prices for posters and frames sold on Amazon’s UK website. Both parties used automated re-pricing software to establish the cartel. Trod, based in Birmingham, and GB eye, based in Sheffield, sold licensed sport and entertainment merchandise and related products.
The arrangement applied to posters and frames sold by both parties on online market places from 24 March 2011 (at the latest) to 1 July 2015 (at the earliest). GB eye reported the cartel to the Competition and Markets Authority (CMA) under the CMA’s leniency policy. Accordingly, it will not be fined providing it continues to cooperate and complies with the conditions of the leniency policy. The £163,371 penalty imposed on Trod (in administration) included a 20 per cent discount for Trod’s admission and cooperation with the CMA investigation.
As Daniel Aston was the managing director of Trod at the relevant time and because he personally contributed to the breach of competition law, the CMA considered that he was unfit to be a company director for a specified period.
The Competition and Markets Authority (CMA) may, under the Company Directors Disqualification Act 1986, seek the disqualification of an individual, either by court order or accept legally binding undertaking, from holding company directorships or performing certain roles in relation to a company for up to 15 years, where that individual has been director of a company which has breached competition law.
Undertakings can agree to give an undertaking not to act as a company director to avoid a Court hearing. A disqualification undertaking has the same legal effect as a disqualification order. The Company Directors Disqualification Act 1986 states:
(1)The court must make a disqualification order against a person if the following two conditions are satisfied in relation to him.
(2)The first condition is that an undertaking which is a company of which he is a director commits a breach of competition law.
(3)The second condition is that the court considers that his conduct as a director makes him unfit to be concerned in the management of a company.
This is the first used of this prerogative for competition law infringement since it came on the statute book.
This decision is a salutary reminder that all directors have a responsibility to ensure that companies do not engage in unlawful anti-competitive practices, and if they do and directors knowingly participate in them, they are likely to be disqualify from acting as a company directors in addition to other criminal penalties.