• Norris v Government of the United States of America and others (Criminal Appeal from Her Majesty's High Court of Justice)
  • R V GG PLC and others (On Appeal from the Court of Appeal (Criminal Division))

These two eagerly awaited House of Lords decisions were delivered today and have provided very useful clarity that price fixing can be prosecuted as common law conspiracy to defraud (in addition to prosecution under the Enterprise Act 2002) if aggravating factors, such as misrepresentation, are present.

In relation to the GG, drug company, case the NHS has previously, successfully, obtained millions of pounds in settlement of damages claims from some of the drug companies involved. In this decision the House of Lords have suggested that the criminal charges against the drugs companies can be re-cast to allow the necessary aggregating factors to be highlighted. This means that whilst the case is not yet concluded, the prosecuting authorities may yet secure criminal convictions against those individuals that were involved.

Ian Norris still faces possible extradition to face criminal prosecution (and potentially jail) in the US, for the lesser offence of obstruction.

Gordon Downie, head of Competition and Regulation at Shepherd and Wedderburn, comments:

"On the one hand, these cases provide the business community with useful certainty that pre-2003 price fixing activity can only be criminally prosecuted where the conspirators have explictly misrepresented or otherwise aggravated their behaviour. On the other hand, those involved in bid-rigging (whether before or after 2003) who sign 'non-collusion' certificates are now very much on notice that they are potentially in the firing line for prosecution for fraud. There may well be pressure on the OFT now to clarify that post-2003 conduct that may fall into the 'conspiracy to defraud' category will only be prosecuted if they fall within the narrower scope of the statutory cartel offence.

These cases also come in the context of the OFT's market study into the pharmaceutical price regulation scheme and the department of health's negotiations in relation to the way in which it buys drugs. In some ways this judgement can be seen as strengthening the bargaining position of the NHS in those negotiations and tackling the prices paid for drugs, particularly generic drugs, is likely remain a focus for competition law authorities for some time to come."

The Cases

  • Norris v Government of the United States of America

Ian Norris, former head of Morgan Crucible, has been fighting extradition to the United States following his 2005 arrest. It is alleged that Mr Norris, in his former role as head of Morgan Crucible was party to a price fixing conspiracy organised in the UK and with effect in the US market throughout the 90s. Such price fixing conspiracies are expressly prohibited by the Competition Act 1998, but were not specifically criminalised until the Enterprise Act 2002 came into force in 2003.

Mr Norris has therefore successfully argued that prior to 2003 price fixing on its own was not a criminal activity in the UK. In the absence of any aggravating factors in this case, he cannot be extradited to the US for his alleged price fixing activities.

  • R v Goldshield Group plc and other

The House of Lords have also passed judgement in the case brought by the Serious Fraud Office against nine individuals and five drug companies who it is alleged conspired to defraud the NHS between 1996 and 2000 by fixing the prices of certain drugs (warfarin, marevan and some penicillin based antibiotics).

Following dawn raids in 2002, criminal proceedings were commenced against the following pharmaceutical companies and nine of their employees / former employees;

  1. Generics (UK) Limited
  2. Goldshield Group Plc
  3. Kent Pharmaceuticals Limited
  4. Norton Healthcare Limited
  5. Ranbaxy (UK) Limited

In this case, the drug companies appear to have made a number of aggravating misrepresentations as part of the NHS buying processes and so the prosecution services may now update the cases against them to take account of these latest rules. The individuals involved could yet serve prison sentences.