Today, the UK Competition and Markets Authority (CMA) published a 60-second summary for company directors to avoid disqualification for breaches of competition law. Please see the full text of the guidance here. This is part of a series of CMA short and simple guides on competition law and is relevant to all directors whose companies fall within the scope of EU or UK competition law.
This follows the CMA’s first ever director disqualification order issued in December 2016 accepting undertakings of a company director admitting wrongdoing and agreeing that his conduct “made him unfit to be concerned in the management of a company” for 5 years. The CMA pursued this case despite the rather small turnover of the companies involved. Details of the case can be found here.
The Company Director Disqualification Act 1986 allows the CMA to apply to court for an order disqualifying a director from holding company directorships or performing certain roles in relation to a company for a specified period of up to 15 years. It can also accept undertakings by a director. The following conditions must be satisfied when issuing a disqualification order:
- A company of which the individual is a director commits a breach of competition law; and
- The individual’s conduct as a director makes him unfit to be concerned in the management of the company.
A disqualification order can be imposed where a director ought to have known that the relevant conduct was a breach of competition law. The CMA has high expectations of directors which was is also confirmed in today’s 60-second summary: “Company directors have a special responsibility to be well-informed about their company practices and sure they comply with the law”.
Today’s paper and the CMA’s first disqualification order may well suggest a step-change in CMA enforcement of competition law against individuals. In addition to director disqualification individuals face criminal sanctions in the UK for cartel activity. However, the Authority has found it difficult so far to obtain them and in fact only 4 individuals have been sentences since the cartel offence was introduced in 2003. The threshold of the criminal offence has recently been lowered (in particular the subjective element of “dishonesty” was removed by Act in 2014). Although we are likely to see more criminal convictions this will not happen for some time as for cases dating back before 1 April 2014 the subjective condition of dishonesty still applies. In the meantime and going forward the CMA will see disqualification orders as a welcomed additional deterrent in its enforcer toolbox.
We recently discussed this topic in Jan. 19th “Breakfast with Europe” webinar, a recording of which can be found here.