Back in March, the UK Government confirmed that it would change the law on criminal cartels, so that conviction would no longer require proof of dishonesty. This change could potentially see participation in perfectly lawful and legitimate activities that may involve an element of collective price setting, such as the Lloyd's subscription market or insurance pools, becoming a criminal offence for the individuals concerned, punishable by up to five years in prison.
The cartel offence, originally introduced in 2003, makes it a criminal offence for individuals to participate in certain types of serious anti-competitive conduct, such as price fixing and market sharing. Currently, individuals can commit the offence only if they act dishonestly. The Government is now pressing ahead with removing the requirement for dishonesty, a change which the OFT has argued is needed to make it easier for it to prosecute genuine cartelists.
The formalistic approach of the statutory definition of the offence, which makes no reference to an intention to restrict competition, creates a real risk that legitimate activities involving collective price setting could become a criminal offence. While the current requirement for proof of dishonesty provides an important safeguard, the revised offence would include no mens rea suitable for distinguishing legitimate from illegitimate conduct. In effect, it will become a strict liability offence. Despite the fact that this move was widely criticised by practitioners when BIS consulted on it earlier this year, the changes are now embodied in the Enterprise and Regulatory Reform Bill, which has passed Second Reading and is now being considered by a Commons Public Bill Committee. The Committee is currently hearing evidence and is accepting written submissions at the end of the Committee state, on 17 July.
Although BIS has attempted to head off criticism of the change by introducing a defence to the offence if "relevant information" is provided to customers before they purchase a service that has been subject to an agreement that could otherwise be caught by the offence, this is unlikely to be sufficient to address concerns. In particular, this defence will be available only if customers receive the specific information required, before arrangements are implemented. At the very least, this risks requiring market participants to introduce a new bureaucratic process for no real advantage. In addition, it may not be appropriate in all cases to give information to customers in advance. It is also limited reassurance that the OFT may not prosecute clearly legitimate arrangements, since this would not prevent commission of the offence in the first place, which has implications under UK money laundering rules and Proceeds of Crime Act.